Fidelity International today set out the key voting considerations it will be addressing as Europe’s AGM season begins: responding to the cost of living crisis, continued focus on climate change and advocating gender diversity on boards.
As a research-led asset manager, Fidelity believes that active ownership is a positive force for driving sustainable business practices at the companies it invests in. Voting at shareholder meetings is a cornerstone of Fidelity’s stewardship strategy.
- In December 2022, Fidelity addressed a letter to board chairs at 330 companies across all major European indices, encouraging boards to ensure that pay decisions reflect the principles of fairness and equitable treatment.
- In 2021, Fidelity reinforced its voting policy by setting minimum standards on climate and gender diversity, and continues to engage with issuers to provide guidance on how it expects these to be met.
- Fidelity has released its Deforestation Framework, with intention to hold boards accountable through voting from 2024.
Responding to cost of living crisis is a key concern for Fidelity
During this AGM season, Fidelity will expect remuneration committees to consider the broader workforce experience when setting executive pay, including avoiding base salary increases for executive directors that outpace the wider workforce. Fidelity is also asking boards to remain mindful of the windfall potential for long-term incentive plan (LTIP) awards that were granted in Spring 2020 in the immediate aftermath of the Covid-19 outbreak.
A continued focus on climate change to achieve net zero
As part of Fidelity’s commitment to reach net zero portfolio emissions by 2050, Fidelity has invested heavily in tools and expertise to drive engagement on climate issues, and under its voting guidelines, will vote against directors at companies that fail to meet its minimum expectations on climate change governance, policies, and disclosures. Climate transition plans and climate shareholder proposals will remain in the spotlight, and Fidelity will continue to use its votes to advocate for companies to adopt decarbonisation strategies that support a credible societal transition to net zero.
In its engagements, Fidelity is asking companies to explain how the global energy crisis may have impacted their net zero strategy in TCFD-aligned disclosures. Furthermore, in certain sectors where excess profits are materialising due to energy price dislocation, it is encouraging companies to allocate an appropriate share towards the build-out of renewable infrastructure to accelerate the transition.
Further advocating for gender diversity
Fidelity is a strong advocate for gender and racial diversity. While diversity and inclusion can have a significant social impact it’s important to note how this also generates critical and positive impact on long-term value creation and risk mitigation. This should encourage boards to seek director candidates with different skills and backgrounds. Fidelity will actively engage and consider voting against company management in most developed markets that do not have at least 30 per cent female representation on the board of directors. In markets where standards on diversity are still developing, an initial 15 per cent threshold is targeted. Last year Fidelity voted against management at over 4001 companies, (including abstentions) globally due to board diversity concerns.
New Deforestation Framework launched
In addition, in line with Fidelity’s 2023 strategic sustainable investing priority to support natural capital, the firm has released its Deforestation Framework, providing its roadmap to address deforestation via an engagement-led approach. Where companies in scope do not meet our minimum expectations, Fidelity will hold members of the board accountable through voting from 2024 onwards.
Jenn-Hui Tan, Global Head of Stewardship & Sustainable Investing comments: “One of the most powerful ways we can bring about change is through our vote. As we look ahead to the current AGM season, our focus on strong governance amidst a cost of living crisis will be front of mind.
“The cost of living crisis will impact individuals and companies differently, and we recognise that solutions aren’t always straightforward and will depend on individual circumstances. For many companies, inflationary pressures are already acutely evident — often in both energy or labour costs — and these pressures are having significant social impacts on employees and communities that should be managed in a responsible manner.”
