Fidelity International has announced plans to cut the carbon emissions in its investment portfolio by 50 percent by 2030 in a move that will put more pressure on companies to show they are managing the impact of climate change.
The global investment firm, which looks after around $787 bn in client assets, has also published information about new internal climate ratings that it will use to assess the carbon reduction plans of portfolio companies.
The move aligns Fidelity with the aims of the upcoming UN Conference on Climate Change (COP 26) in Glasgow, UK, where countries are being asked to set ambitious 2030 emissions targets to help them achieve net-zero by 2050.
As part of its new climate strategy, Fidelity says it will engage with companies over their approach to climate change and vote against those that do not meet minimum standards, which cover areas like emissions data, disclosure practices and alignment with the Paris Agreement goals.
Fidelity says it will target ‘high impact’ sectors, such as energy, transportation and materials, in a bid to push those companies to accelerate their transition to a low-carbon economy. If issuers show no progress or potential for change after an engagement period, the firm says it will consider divestment.
The asset manager says an initial focus area will be thermal coal to ensure it can meet its commitments on emissions reductions. The firm has committed to ending exposure to the sector by 2030 in OECD countries and by 2040 worldwide.
Fidelity’s new climate ratings will focus on three key areas: net-zero plans, climate governance – which covers lobbying and accounting practices – and capital allocation. Based on their score, companies will be placed into one of five groups. The top two groups will be eligible for net-zero portfolios, while the bottom group will be at risk of divestment.
‘As a responsible investor, we must understand the carbon footprint of the portfolios we manage for our clients and work with the companies we invest in to reduce emissions in alignment with global net-zero targets,’ says Jenn-Hui Tan, global head of stewardship and sustainable investing at Fidelity International.
‘Fidelity invests in many of the world’s leading companies and we want to use our influence as active stewards of capital to help the world meet its climate goals. This long-term, engagement-led policy aims to hold businesses to account for their carbon footprint and ensure that transparent public markets are a powerful force for decarbonization.’
