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Two important points for investors to note about ESG investing

GoWealth10 Oct 2023
Paying attention to Environmental, social and governance (ESG) issues can contribute to the world, how about: any valuable insights can investors gain from how asset managers use ESG in investing? Which sectors may achieve net-zero emissions targets because of their emphasis on ESG factors?ESG has become crucial in investment strategy of asset managersMore and more asset management companies are including ESG factors into investment considerations to help investors avoid potential risks and increase their ability to withstand fluctuations.For example, Fidelity takes an active approach1 to sustainable investing and aims to enhance long-term investment returns while managing risk for our clients. The approach is built on three pillars: integration, engagement, and collaboration.Take Integration as an example, Fidelity believes that assessing sustainability is part of fundamental investing, and by integrating it into Fidelity investment processes, Fidelity can gain a complete view of the companies and markets under monitoring.Through Fidelity corporate access, due diligence processes and industry expertise, its investment analysts deliver independent sustainability analysis that is summarised by the proprietary ESG ratings.These ratings, combined with input from Fidelity specialist ESG team, and external analysis and ratings, help ensure the team is better informed of a company’s ESG performance, and the potential risks and opportunities this poses for investors.market5_en_v2On the other hand, Allianz Global Investors (AllianzGI) has its ESG investment strategies including ‘Integrated ESG’, ‘Impact Investing’ and ‘Sustainable and Responsible Investing2:
  • Integrated ESG: Review ESG factors and combine ‘Integrated ESG’ with due diligence and engagement across all asset classes (including equities, fixed income, multi-asset and alternative assets) to improve investment risk profiles to achieve better risk adjustments return later; make good use of analytical frameworks to examine a company’s ESG characteristics to manage tail risks and vulnerabilities.
  • Impact Investing: AGI’s impact investing strategy has three core beliefs: the goal is to create positive value for society and the environment while striving for potential financial returns; there is a clear link between each investment and the results achieved; and a commitment to evaluation and recording. The impact of investment is to verify whether the investment strategy is effective.
  • Sustainable and Responsible Investing: AllianzGI’s sustainable SRI strategy research is divided into four major areas. It uses proprietary SRI ratings and exclusion methods to evaluate ESG, aiming to create a sustainable investment portfolio, and conduct different investments in stocks, fixed income and multi-assets. AllianzGI is committed to providing "best-in-class" SRI strategies across asset classes.
Corporate progress in including ESG and achieving net-zero emissions goalsIt's only seven years until 2030. This is when Fidelity’s analysts want to see most companies achieve their carbon net-zero targets. Fidelity’s 2023 ESG Analyst Survey3 finds that, though some companies’ progress towards their net zero targets may fall short, there are still a lot of positive takeaways from this year’s survey, with, for instance, company engagement across Asia is improving, and our analysts observing increasing focus among businesses on ESG factors.Not all market segments find the path towards net zero straightforward. On a positive note, communications and IT are largely on track, partly because many of the leading players in these sectors have achievable ambitions.On the other hand, businesses operating in, for instance, the energy and airline space rely more on the developmental pace of transformative technologies. “I estimate that 10 per cent of the airlines’ path to net zero will happen this decade,” says airline specialist Neve. Savings will come from investments in more fuel-efficient aircraft and sustainable aviation fuel. “The key problem is that the technology to get there has still to be developed.”Despite the uncertain economic backdrop and shifting corporate priorities, ESG remains relevant, particularly in China, where the government plays a significant role. The study among Fidelity’s analysts also reveals that company engagement has improved, particularly in China and Japan. For the past few years, what our analysts saw as effective engagement has hovered around the 30 per cent level for China, but in 2023, this is up by 20 percentage points.Government regulation and incentives are also essential to drive change. Common standards are needed to achieve environmental and social goals. In the ESG Analyst Survey, 98 per cent of those questioned say that regulation helps accelerate progress towards sustainability goals. Meanwhile, only a quarter of the companies covered by Fidelity currently use carbon markets as a part of their net-zero ambitions. As such, they need clearer price mechanisms and international functionality.Want to search or invest in ESG Funds?Open App and click【GoWealth > Pick your own funds > Equity > ESG】
  1. You may search ‘Fidelity Stainable Investing Approach’ on the internet for more details
  2. Source: ‘Key strategies for ESG investing’, Allianz Global Investors, as of Nov 2020
  3. You may search ‘Fidelity ESG Analyst Survey 2023’ to uncover more findings
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