Fidelity International’s annual ESG analyst survey has found that companies remain keen to engage with stakeholders on how they can improve their sustainability efforts, recognising the rapidly changing physical, economic and regulatory environment around them.
This is despite the fact that reaching net zero, while critical for the survival of our planet, remains one of the toughest challenges the world faces to date.
Fidelity’s ESG analyst survey gathers the views of its in-house analysts across the world, aggregating bottom-up information from c.20,000 individual company interactions* to find key ESG trends in the corporate landscape.
Chart 1: Companies remain open to ESG engagement
Globally, Fidelity’s analysts reported 68% of companies they cover have been responsive to their engagement efforts over the past 12 months. Companies in Japan led the pack with 89% keen to engage in the last year, followed by EMEA / Latin America (83%) and Asia Pacific, ex China, ex Japan (71%).
Companies lag behind in net zero progress but risks become reality
Only 43% of Fidelity’s analysts surveyed believe companies have a credible net zero goal for 2050 as it stands today, highlighting the urgency in accelerating net zero plans. However, companies are waking up to the risks of not meeting targets, with 85% of Fidelity’s analysts believing companies are addressing the threats to their businesses posed by potential changes in climate and nature.
Chart 2: Most companies are already addressing the threats posed to their business by climate change
Three most effective ways we can move the needle
While it is clear that there is still a long journey ahead to reach net zero, Fidelity’s analysts identify three areas that are expected to spur improvements in companies’ environmental practices: regulation, government support, and shareholder action.
Chart 3: Regulation, government incentives, and shareholder action will drive corporate environmental behaviour
Jenn-Hui Tan, Chief Sustainability Officer at Fidelity International comments: “While companies may be lagging on their transition plans, there is growing awareness of the threats posed by a warming climate and deteriorating ecosystems, providing companies with a strong incentive to stay engaged.
“Despite an openness from companies to engage, our survey highlights there is still a long way to go, and companies need continued support in reaching their net zero goals. Regulation, government incentives and shareholder action all have a key role to play in creating an enabling environment for a successful corporate net zero transition, recognising that long term decision-making requires careful consideration of trade-offs and limitations in both financial and sustainability objectives, against an uncertain macro backdrop.”
Main image: guillaume-de-germain-6Xw9wMJyHus-unsplash
