The latest developments in the ESG space.

Fidelity International
Fidelity International has released key findings from its survey on ‘just transition’ which assesses investor awareness and investment appetite for the theme. ‘

Fidelity International engaged Coalition Greenwich to conduct a study on ‘just transition’ and its investment implications amongst 120 institutional investors and intermediary distributors in selected countries in Europe and Asia. The research was conducted in June and July 2023.

The survey shows that investors lack understanding and conviction in achieving a ‘just transition.’ Defined by Fidelity as “achieving the transition from a high carbon to a low carbon economy in a manner in which is fair for everyone,” the concept of ‘just transition’ is familiar to 42 per cent of respondents, with awareness lower among Asian investors (30 per cent) compared with European investors (47 per cent).

In line with the lack of familiarity with the term, investors also revealed a lack of conviction that, as a society, we are likely to achieve a just transition, the firm continued. Forty-three per cent of respondents suggest it is unlikely, and if it is to be achieved, over a quarter of investors believe that the transition will take more than 15 years, while 52 per cent believe it will be an ongoing process.

This lack of awareness and low level of conviction may explain why 35 per cent of those familiar with ‘just transition’ already have or are developing a dedicated investment strategy focused on this theme. Europe seems to be stepping ahead – 38 per cent of respondents in Europe have or are developing a dedicated investment strategy versus just 20 per cent in Asia. However, over half of investors currently consider it as part of a wider approach to ESG.

In the long term, all investors surveyed believe that investing in a ‘just transition’ will have a positive impact on risk/return profiles, demonstrating that investors do see this theme as an investment opportunity. However, in the short-term investors remain split on whether it will have a positive, negative or neutral effect, the firm said.

When asked about the top reasons for investing in a ‘just transition’, over three quarters of respondents chose “having a positive impact on the environment by achieving net zero” alongside “having a positive impact on the society,” highlighting the connection between environmental and societal considerations, the survey reveals.

Given this response, it comes as no surprise that 92 per cent of the responses highlight the sector of “renewable energy” as the most attractive from an investment perspective, followed by technology and IT, and agrifoods. In terms of asset class, 89 per cent of investors believe that equities will play the most significant role in achieving a ‘just transition’, followed by private assets and thematic investments, the firm added.

While it is promising that investors see growth opportunities in achieving a ‘just transition’ over the long term, the slow pace of its development can be explained by the numerous barriers that remain. Indeed, the survey highlights the obstacles that impede progress, including a lack of clear government policy, proactive lobbying by legacy industries to pollute for longer, geopolitical tensions, economic recession, and ingrained consumer behaviours.

“Put simply, a ‘just transition’ means a transition that doesn’t leave anyone behind in the move towards a more sustainable economy. But in reality, ‘a just transition’ encompasses a tangle of issues as it has many ramifications linked to climate, communities, labour markets and divergences between developed and developing countries,” Emilie Goodall, head of stewardship, Europe at Fidelity International said. 

“As a result, how to measure and implement a just transition is incredibly complex but one thing is clear, the societal impact of transitioning to a sustainable economy has to be a central consideration. And while investors are starting to understand the importance of a just transition, our survey indicates that there is a need to promote further awareness,” she continued.

“At Fidelity international, we have a key role to play in engaging both investors and our investee companies on how to consider a just transition in a consistent and substantive way, supporting the communities and countries that need it the most to transition. At the heart of our approach is active stewardship – initiating and combining bottom-up corporate engagement, top-down thematic engagement, and system-wide stewardship for maximum impact,” Goodall concluded.