Watershed year predicted for ESG

By Jayson Forrest - Managing Editor  - IMAP Perspectives

Jenn-Hui Tan Global Head of Stewardship & Sustainable Investing - Fideltiy International
Jenn-Hui Tan Global Head of Stewardship & Sustainable Investing - Fideltiy International

Watershed year predicted for ESG

As we enter a new decade, Fidelity International’s 2020 Analyst Survey has uncovered a tipping point for corporates globally, as they recognise that considering environmental, social and governance factors is not just the right thing to do, but good business, too.

 

This was one of the key findings to emerge from the survey, which found that this year, 90 per cent of Fidelity International’s analysts revealed that some or all of the companies they cover are focusing more on ESG, up from 70 per cent in 2019.

 The 20 per cent increase comes on the back of a pronounced increase in climate change awareness and corporate reforms, with the rise in awareness filtering through to most sectors and all regions, including areas where ESG interest had previously appeared to stall or be in decline.

 According to Fidelity International Global Head of Stewardship and Sustainable Investing, Jenn-Hui Tan, while corporate governance is generally improving, with greater levels of investor engagement throughout the world, companies have made less progress on board diversity.

Most Fidelity International analysts report that their companies’ boards have low to middling diversity, with almost no change on the previous year.

ESG on the rise in China and the U.S.

While ESG has steadily been increasing in importance in Europe, it is now very much on the agenda in regions such as Asia. This is particularly so for China, where 80 per cent of analysts report an increase in the emphasis on ESG at some or all of their companies in 2020. Tan said this represented a significant rise from 63 per cent in last year’s survey and just 33 per cent in 2018.

Just over 90 per cent of analysts covering the U.S. and Canada cited a growing emphasis on ESG at some or all of their companies, compared with just 57 per cent in 2019.

“It is encouraging to see an increased focus on ESG from China corporates,” Tan said. “We believe this is due a combination of factors, including the Chinese authorities’ drive to improve governance, a rush among companies to invest in renewables before government subsidies are cut, and calls from investors for greater transparency around supply chains. More Chinese companies are also considering increasing dividends to shareholders and engaging with investors as a way of attracting further capital.”

Tan added: “In the U.S., despite a rolling back of environmental regulations at a federal level, interest is growing. Indeed, sustainability is bouncing back after appearing to be on the wane in 2019, spurred on by the very public re-definition of corporate purpose by the Business Roundtable.”

The Business Roundtable is an association of chief executive officers of America’s leading companies, who work together to promote a thriving U.S. economy and expanded opportunity for Americans through sound public policy.

Each year, Fidelity International surveys its global analyst team to take the pulse of the corporate landscape. The research starts at the bottom, aggregating approximately 15,000 individual company meetings until a big picture emerges from which results can be extrapolated.

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