Image credit: Dave Cutler
July 2022
Sustainable 
Investing 
Report 2022 
ESG 2.0

*Although combined headline client asset figures (under management and administration) for Fidelity International and Fidelity Canada are reported here, it should be noted that the financial results of Fidelity 
International and Fidelity Canada are not consolidated from a financial reporting perspective.
Source: Fidelity International, data as of 31st December 2021.
$812.8bn
Assets under management 
and administration*
400+
Investment professionals globally including 30+ 
sustainable investing specialists  
26
Locations
30
Sustainable strategies across 
asset classes
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Sustainable Investing Report 2022: ESG 2.0
Who we are 
Fidelity International offers investment solutions and services and retirement expertise globally to institutions, 
individuals, and their advisers. As a purpose-driven, privately held company with over 50 years of heritage, we think 
generationally and invest for the long term. 
Our focus is on delivering sustainable investment returns for our clients, while managing our impact on society and the 
environment.  To achieve this, we incorporate sustainability into our investment process and business operations and 
work closely with investee companies to help them operate more sustainably.

By asset class
Equities
62.1%
Fixed 
Income 
22.7%
Real Estate 0.4%
Multi Asset and 
Multi Manager 13%
Money Market/Cash 1.8%
By client origin
Source: Fidelity International, December 2021. The institutional asset AUM figure consists of Defined Benefit pension schemes, Government Institutions Group, and corporate cash reserves. 
This represents assets under management for Fidelity International and excludes funds under administration. This also excludes assets under management and assets under administration for Fidelity Canada. 
Data as of 31st December 2021.  
Institutional assets
$123.2bn
Europe incl. UK
30.58%
Asia Pacific and Japan
60.35%
Middle East, South 
America and other
9.07%
$323.4bn
Europe incl. UK
67.86%
Asia Pacific and Japan
29.44%
Middle East, South 
America and other
2.70%
Wholesale, Defined 
Contributions (DC) 
and Retail
Assets under management
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Sustainable Investing Report 2022: ESG 2.0

Foreword
The next step in the response to the climate emergency will be the hardest. Turning pledges and commitments 
into real action requires effort; however, it is essential now that the scale of the problem is better understood, 
and the solutions made clearer. 
We might well wish for a more stable geopolitical and macroeconomic backdrop for what is a substantial task. 
But we can’t afford to let the urgent distract from the existential and wait for conditions to improve.
With that in mind, and to sharpen our analysis of the progress made by our investee companies, we have 
enhanced our proprietary sustainability ratings to include assessments of both the financial, and non-financial 
impacts, of company actions. This is what is known as ‘double materiality’ and it is crucial to compiling a 
forward-looking view on the sustainability profiles of corporate issuers. 
Asset managers have a choice to engage or divest, or a combination of both. As active managers, we have 
preferred to engage with companies where their transition plans fall short. Getting from brown to green is the 
priority, not just in portfolios but in aggregate across the world. To that end we are employing a climate rating to 
identify the companies with whom we should prioritise engagement to meet our net zero goals.
By working with other investors in this area, through groups such as Climate Action 100+, we can share 
knowledge and investment policies, engaging directly with management to focus improvements on areas that 
need it most.
Finally, sustainable investing is as important to private markets as public ones. Private markets give investors 
access to those smaller-scale firms working on green technology to reshape industries, as well as renewable 
energy projects. 
Sustainability is complex and, like most areas of finance, constantly evolving. It requires us to iterate our own 
processes to keep pace with change and ensure our investment ambitions remain high. 
Anne Richards 
CEO, Fidelity International

Overview: ESG 2.0	 	
	
	
	
	
	
	
	
06
Section 1: ESG integration at Fidelity   		
	
	
	
11
     2021 update	 	
	
	
	
	
	
	
 	
	
13
     Ratings 2.0	 	
	
	
	
	
	
	
	
       	15
     High impact	 	
	
	
	
	
	
	
	
       	20
     Allocating for climate change  	
	
	
	
	
       22
Section 2: Active ownership at Fidelity  	
	
	
	
24
     Engagement in 2021	
	
	
	
	
	
             	 26 
     Voting in 2021	
	
	
	
	
 	
	
	
       27	
     Sustainable investing themes 		
 	
	
	
           	 28
     Environment 		
	
	
	
   	
	
	
 	
    	 30 
	
Climate	
	
	
	
	
	
	
	
        	 	
31
	
Nature		
	
	
	
	
	
	
	
        	 	
40
     Social 	 	
	
	
	
   	
	
	
	
 	
    	 46 
	
Employees 	
	
	
	
	
	
	
	
        	 	
47
     Governance 		
	
	
	
   	
	
	
 	
    	 55 
	
Oversight	
	
	
	
	
	
	
	
        	 	
56
	
Incentives	
	
	
	
	
	
	
	
        	 	
57
Contents

Sustainable investing has been put to the test 
over the past year. The war in Ukraine and the 
cost-of-living crisis have highlighted the ethical 
and social risks of complex supply chains, beyond 
those revealed by the pandemic, and the risks to 
the net zero transition. 
Unfortunately, future climate costs could dwarf 
today’s pressures if the world fails to decarbonise 
at pace. While COP26 did not deliver all that 
had been hoped for, agreements on coal, 
methane, and deforestation, the establishment 
of international green reporting standards and 
the adoption of net zero pledges are driving an 
evolution in sustainable investing. Unlike ESG 1.0, 
ESG 2.0 is not just a risk management tool but a 
way of achieving impact. 
An ESG evolution
At Fidelity, we see this evolution as the first of many 
for the industry. ESG is now considered across 
all asset classes, including private markets, and 
proactive engagement has become essential to 
gathering information and instigating positive change. 
Disclosure too has evolved in anticipation of more 
climate information being required by the SEC and 
a new set of reporting norms from the International 
Sustainability Standards Board. Many more 
companies are completing Task Force on Climate-
related Financial Disclosures (TCFD) reports and 
providing better quality data - though still not enough. 
But the biggest difference between ESG 1.0 and 2.0 
is the shift towards incorporating not just those ESG 
factors that affect a company’s ability to operate, but 
also the potential impact of a firm’s activities on the 
wider community - so-called “double materiality”.
Jenn-Hui Tan 
Global Head of Stewardship and Sustainable Investing
Source: Fidelity International, April 2022. 
Chart 1: The ESG evolution from 1.0 to 2.0 
Increased sophistication and focus on influence across the sustainability complex
Objective
Research
Financial materiality
Double materiality
Risk management 
External influence
External influence
Risk management
Engagement
Reactive, focused on G
Proactive E, S & G
Climate
Carbon footprint
Net zero alignment and Just Transition
Asset classes
Mainly equity 
All asset classes
Measurement
Ratings
Multiple tools
Exclusions
Heavy reliance
Limitations acknowledged
Movement
Static
Dynamic
Policy & 
regulation
Evolving 
Client 
Needs
ESG 
1.0
ESG 
2.0
Overview: ESG 2.0 
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Sustainable Investing Report 2022: ESG 2.0

Upgrading our ratings 
We have changed Fidelity’s proprietary ratings 
system (see page 13) to explicitly include the 
concept of double materiality. Our ratings are 
constructed by our investment analysts based on 
the same fundamental bottom-up research process 
that drives our investment recommendations. As 
a result, our ratings take a forward-looking view 
of a company’s sustainability characteristics and 
its ability to manage negative externalities. We 
have already completed our assessment of over 
3,700 corporate issuers across equities, fixed 
income, and private credit, and our sovereign and 
structured credit assessments are on track for full 
coverage this summer. 
We have also begun the rollout of our climate 
rating, introduced in 2021 as part of Fidelity’s 
Climate Investing Policy, which identifies the 
companies we should engage with first and most 
as part of our aim to halve portfolio emissions by 
2030 and reach net zero by 2050. 
Impact matters
Our proprietary tools are vital if we are to deliver 
outcomes, such as reducing carbon emissions 
and helping our clients and society achieve net 
zero in time. 
On page 20, we examine what impact means for 
Fidelity and the multiple ways in which we can 
act to bring about positive change. These also 
include a greater focus on Sustainable Finance 
Disclosure Regulation (SFDR) Article 9 funds 
which require specific sustainability objectives, 
developing more strategies aligned to the UN’s 
Sustainable Development Goals (SDGs) and 
ramping up engagement in three key sustainable 
investing areas: ending deforestation, ensuring 
a just transition and, crucially, the principle of 
double materiality.
Halting forest loss
Deforestation sits at the intersection between 
climate change and biodiversity, destroying natural 
carbon sinks and ecosystems that contribute to 
clean air, water, soil quality and crop pollination.  
At COP26, over 100 countries, accounting for 90% 
of the world’s forests, pledged to halt forest loss 
and land degradation by 2030. Meanwhile, 30 
financial institutions, including Fidelity, agreed 
to eliminate agricultural commodity-driven 
deforestation risk from their portfolios by 2025. To 
achieve this, we have assessed group exposure 
to companies contributing to deforestation along 
the entire value chain from producers and food 
retailers to enablers such as banks. We are 
pushing hard for integrated risk assessments and 
enhanced traceability of supply chains, while also 
addressing related issues such as decent working 
conditions for vulnerable groups of workers (see 
page 48).
No one left behind
Equally important is ensuring that the energy 
transition is a just and secure one, with social 
and financial burdens shared fairly, and with no 
one left behind. That includes the workers and 
communities dependent on the fossil fuel industry 
At COP26, over 100 countries, 
accounting for 90% of the world’s 
forests, pledged to halt forest loss 
and land degradation by 2030. 
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Sustainable Investing Report 2022: ESG 2.0

and developing countries still reliant on carbon-
intensive sources of energy. Unless their needs are 
accounted for and the transition properly reflects 
historic and current responsibility for climate 
change, it won’t happen fast enough.
Directors held to account
One of the most powerful ways we can bring about 
change is through our votes, especially where we 
act alongside other shareholders. Last year we 
set minimum standards on climate and gender 
diversity, and subsequently engaged with issuers 
to provide guidance on how we expect these to 
be met, allowing time for companies to incorporate 
our expectations in their FY21 disclosures. 
We have now started to vote against the boards 
and directors of companies where they are not 
meeting our minimum standards, and already 
a significant number have made material 
improvements to their climate change strategies, 
governance, and disclosures.
Conclusion
Sustainability risks, and opportunities, are often 
thought of as uncertain and long-term in nature. 
And in benign times, the apparent importance of 
transparency and good governance can fade. 
However, it is at times of crisis that the need for 
robust risk management and governance comes 
to the fore. These are often good indicators 
of which companies will remain resilient and 
continue to serve a societal purpose beyond 
solely profit, to meet the multi-faceted needs of 
their stakeholders and to deliver the long-term 
value creation that investors expect.
 
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Sustainable Investing Report 2022: ESG 2.0

2021 sustainable investing highlights 
Rated A+ 
across all categories by the 
UN Principles for 
Responsible Investment* 
Named House of the Year at 
Asian Private Banker Asset 
Management Awards for 
Excellence 
12
new sustainable investing 
team members
Named as a Responsible 
Leader by the Responsible 
Investment Association 
Australasia
Enhanced our proprietary 
sustainability ratings 
framework with over 3,700 
corporate issuers rated across 
equities, fixed income and 
private credit
Updated our Voting 
Principles and Guidelines 
to include new policies on 
climate change and 
gender diversity
Signed the Finance for 
Biodiversity Pledge which 
commits to protect and 
restore biodiversity 
Commenced development 
of our proprietary 
climate ratings
2040
2030
2050
■ Halve the carbon footprint 
   of our investment portfolios 
■ Phase out thermal coal        
   exposure for OECD countries 
■ Achieve net zero emissions 
   across Fidelity’s own 
   corporate operations 
■ Phase out thermal 
   coal globally 
■ Reach net zero 
   across all investment
   portfolios
Launched our Climate Investing Policy and our net zero strategy setting the 
following targets:
CityWire Gender Diversity 
Awards: Best Retention Rates 
Award Judges’ Choice 
Contribution to Gender 
Diversity
*Based on 2020 score (2021 score still to be released as at the date of this report)
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Sustainable Investing Report 2022: ESG 2.0

Fidelity’s firm-wide approach to sustainable investing has 5 pillars
Source: Fidelity International, 2022. 
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Fidelity International
Sustainable Investing Report 2022: ESG 2.0
It is important to understand the material 
sustainability factors that impact long-term value 
creation. Specifically, we aim to achieve: 
1. 	The integration of sustainability factors into our 
fundamental investment research and security 
selection process.
2. 	An understanding of the non-financial impacts of 
our investment decisions on investee issuers and 
their broader stakeholders, including employees, 
suppliers, customers, regulators, and communities.
3. 	A local approach to our sustainable investment 
process, recognising the differences in economic 
systems, market structures, societal norms, and 
business models across all the jurisdictions in 
which we operate and invest.
4. 	Measurable improvements in the behaviour of 
the issuers we invest in or lend to, both directly 
and in collaboration with our peers and 
clients, by leveraging our tools of selection, 
engagement, and voting.
5. 	Mitigation of system-level risks through active 
ownership and policy advocacy. 
Throughout this report we explore how we are 
making progress on our overarching sustainability 
aims, focussing in particular on integration and 
active ownership.  
To deliver on the above aims we have five pillars 
through which we approach sustainable investing:
Sustainability Ratings
Proprietary sustainability 
rating constructed by 
fundamental research 
analysts
Active Stewardship
We engage with 
companies to improve 
their sustainability and 
create societal value
Sustainable Solutions
Deliver solutions to our 
clients in order to help 
them achieve their 
sustainability objectives
Corporate Sustainability
Improve our own 
sustainabillity footprint
Investment Management
Integration across asset 
classes backed by 
dedicated and globally 
distributed specialists
Fidelity’s approach to sustainable investing 
At Fidelity, we consider the longer-term consequences of our actions in both financial and societal terms. 
As global investment managers, how we hold investee issuers to account today can play an important role 
in shaping a more sustainable tomorrow.

Section 1: ESG  
integration at Fidelity

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Fidelity International
Sustainable Investing Report 2022: ESG 2.0
The integration of sustainability within our investment process is achieved via a three-layered framework. 
It is designed to be modular in nature to enable Fidelity to deliver investment solutions to clients, while 
responding to the evolving demands of the regulatory environment. The three layers are outlined below:
Further information on Fidelity’s approach to integration  
can be found in our Sustainable Investing Policy.  
Frameworks  
and standards 
Tools 
Communication, 
products and 
services
The foundation of robust sustainable investing practices consists of data, frameworks 
and standards. This provides a common language to mobilise efforts across Fidelity 
International to work together in building sustainable financial futures.
Under this layer, we will identify the sustainability classification of our funds and 
ensure our standards align with relevant sustainability legislation (i.e. SFDR) or 
sustainability labels, as required.  We will also ensure that client requirements and 
investment team considerations are reflected as part of our framework build-out. 
We have multiple tools to integrate ESG in our investment and stewardship process. 
These include our sustainability and climate ratings, as well as the insights from 
previous engagements. These tools are available through a digital platform and  
can be used by portfolio managers, analysts or members of the sustainable 
investing team for investment decisions or for engagement purposes. The extent  
to which these tools are used vary depending on each person or fund’s needs. 
This is the delivery of investment products and tools to clients, while also providing 
relevant training and support to our partners when approaching sustainability.
Three layers of integration

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Sustainable Investing Report 2022: ESG 2.0
Sustainability ratings framework
We developed and launched the second iteration 
of our proprietary sustainability ratings for equity, 
fixed income and private credit issuers, while our 
sovereign and structured credit assessments are 
on track for full coverage later this year. The ratings 
provide an absolute assessment of companies’ 
sustainability characteristics across sectors, and 
integrate third party datapoints to complement our 
investment analysts’ research and engagement 
insights. We explore the proprietary ratings 
framework and process in Ratings 2.0: Fidelity’s 
sustainability ratings now doubly material.
Private assets
In 2021, we established our private assets business. 
Clients are increasingly looking to allocate to 
sustainable strategies and additionally achieve this 
exposure through private assets.  By adding private 
assets to our global public markets investing 
capabilities, we can help clients access, manage 
and think about asset allocation across all asset 
classes, in which sustainability is deeply integrated 
throughout the investment process. In High impact: 
The pursuit of outcomes we examine investing 
for impact and in particular how impact can be 
achieved through investing in private assets.
We updated our Sustainable Property Investing 
Policy, detailing how we integrate sustainability 
in our real estate investment process, through our 
principles-based approach. To complement this, 
we also published our Real Estate Net Zero 
Carbon Commitment Roadmap, setting out how 
we will reach our net zero commitments for real 
estate to achieve operational net zero by 2035 and 
material net zero by 2050 or sooner.
Climate investing policy
We developed and launched our Climate Investing 
Policy, which introduced new firm and investment 
portfolio level commitments to achieve net zero 
emissions targets. This included a commitment 
to halve the carbon footprint of our investment 
portfolio by 2030, from a 2020 baseline, and to 
reach net zero across all portfolios by 2050.  We 
also set a target to achieve net zero emissions 
across Fidelity’s own corporate operations by 
2030.  The policy sets out in detail how we intend 
to achieve our investment portfolio targets through 
integrating climate factors and investing in net 
zero issuers, climate stewardship and transition 
engagement, and by phasing out exposure to 
2021 update
Throughout 2021, we continued to develop our policies, standards, and tools to support the systematic 
integration of sustainability considerations into our investments. 
We developed and launched 
our Climate Investing Policy, 
which introduced new firm 
and investment portfolio level 
commitments to achieve net zero 
emissions targets.

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Sustainable Investing Report 2022: ESG 2.0
thermal coal. We look at our approach to climate 
stewardship and transition engagement in further 
detail in the Active Ownership section of this report.
To enable the local implementation of these 
global policy and targets, a key part of our net 
zero emissions plan is Fidelity’s proprietary climate 
rating, a tool that assesses companies on their 
decarbonisation progress and will support our 
engagements aimed at reducing our portfolio 
emissions. The tool has been designed to analyse 
firms in three core areas: net zero ambition, climate 
governance and capital allocation to the transition. 
With these assessments we then identify those 
issuers who are either currently achieving net zero, 
aligned to a net zero pathway (as demonstrated 
through emissions reductions over time and robust 
short-, medium- and long-term targets) or with 
differing levels of potential to reach alignment with 
that pathway. The tool reflects the deep integration 
of sustainability factors in our fundamental bottom-
up investment research and security selection 
process, and our commitment to measurable 
improvements in the behaviour of the issuers we 
invest in or lend to.
Finally, in recognition of climate change as a 
system-level risk, we have developed a framework 
for assessing the macro implications of different 
climate scenarios and how these may be altered 
by policy and technology shifts over time.  In 
Allocating for climate change we also explore how 
investors can allocate to climate across different 
asset classes. 
Further information on Fidelity’s approach to climate risks and opportunities  
can be found in our latest TCFD report.
In our latest TCFD report we outline how Fidelity 
is responding to climate risk and opportunities, 
and provide more information on how we are 
measuring emissions across the business.

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Sustainable Investing Report 2022: ESG 2.0
Ratings 2.0: Fidelity’s sustainability ratings 
now doubly material 
Back in 2019, we launched our proprietary 
sustainability ratings, and incorporated these into 
our research and investment decision-making 
process. Third-party ratings, we felt, were often 
backward-looking, provided insufficient detail 
and didn’t suit our bottom-up approach. Having 
our own ratings proved to be an effective way 
to start thinking about how ESG risks might affect 
company valuations and long-term prospects. 
During the Covid-19 crash, oil shock and 
subsequent recovery in 2020, we took a snapshot 
of performance which showed that companies 
with better ESG characteristics were likely to 
be more resilient. See our paper Outrunning a 
crisis: Sustainability and market performance. 
However, the increasing emphasis on real-
world outcomes has encouraged us to evolve 
our proprietary system so that it now embeds 
“double materiality” (the impact a company has 
on communities and the planet, and vice versa), 
giving our analysts deeper insights into material 
non-financial, as well as financial, factors. 
Comprehensive and comparable 
We now have 26 environmental, 14 social, and 
seven governance indicators, supported by 
130 underlying data points alongside analysts’ 
qualitative analysis for each indicator. Key 
indicators are identified and weighted by 
subsector (not just sector), making their materiality 
far more granular and relevant. Our scoring 
Heidi Rauber  
Consumer Staples Analyst
Source: Fidelity International, 2022. 
Step 1.  
Identify material indicators and weightings for issuer
Step 2.
Score the issuer on individual indicators
Step 3. 
Rate the issuer
60+ Environmental datapoints 
30+ Social datapoints
40+ Governance datapoints 
Research conducted by Fidelity’s team of 
sector specialist analysts 
Qualitative analysis drawing on corporate 
access c.20,000 company meetings 
Customized materiality maps created for   
127 individual subsectors
Drawing on up to:
26 environmental, 
14 social, 
7 governance indicators
>90% coverage of major ESG research 
provider’s frameworks
Actionable outputs for c. 4,000 issuers including:
Sustainability rating
Trajectory rating
Environmental Impact score (+ Underlying indicators)
Social Impact Score (+ Underlying indicators)
Governance Score (+ Underlying indicators)
A process which blends quantitative and qualitative input, and produces flexible and actionable insight
Gita Bal   
Global Head of Research, 
Fixed Income
Punam Sharma 
Director, Equities

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Sustainable Investing Report 2022: ESG 2.0
methodology, however, remains consistent 
across key indicators, allowing companies to be 
compared on an absolute basis rather than just 
in relation to their peers. 
We rolled out the second iteration of the 
framework in Q1 2022 and have since exceeded 
our coverage targets by rating over 3,700 issuers. 
Our aim is to get to c.4000 issuers across equity, 
sovereigns, corporate bonds, and private credit 
in the next few months. While the ratings will 
continue to evolve, the new modular approach 
means further data points can be added easily. 
Limitations of our approach 
The in-depth nature of our approach means that 
our coverage is not as broad as a third party 
provider, therefore we continue using third party 
providers in order to supplement our limited 
coverage. Further, the ratings framework is being 
used by some 200 analysts globally with varying 
degrees of understanding of the different ESG 
issues covered, which creates variability in the 
output. We are addressing this challenge by 
providing training on the ratings framework and 
on specific themes and sectors.
How the ratings are used
The sustainability ratings are used in a few ways. 
First, they are used by the analysts to capture 
their insights on a company’s ESG characteristics 
and can help inform their views on a company 
and if they recommend a buy, sell, hold position. 
Secondly, they can also be used by portfolio 
managers at different stages of their investment 
process. It is important to note that each portfolio 
manager has their own approach and the way 
and extent to which the ratings are used depends 
on this approach. Thirdly, we can use them for 
monitoring of a fund’s ESG characteristics and the 
fund’s classification within regulatory frameworks 
like SFDR. On the stewardship front, we can use 
them to prioritise and guide engagement with 
companies. Finally, we use the ratings for client 
communications and reporting. 
We asked one of our senior analysts, Heidi Rauber, 
to describe how she found the ratings process and 
whether it had made a difference to her analysis. 
Q&A with Heidi Rauber, consumer 
staples analyst
How have Ratings 2.0 made a difference to 
you?
The second version of the ratings has allowed 
me to differentiate more between companies, as 
we now have separate numeric ratings for E, S 
and G, as well as an overall letter rating A to E, 
though typically my companies sit in A-C buckets.
Having numeric scores for each allows for greater 
granularity and differentiation as we rate every 
single factor and subfactor. 
My process is first to assign numeric scores to all 
the companies I cover across the range of factors, 
then rank them by the sum of the numeric scores to 
Fidelity’s investment analysts 
are key to making the ratings 
work. They gather qualitative 
data through their research 
and active engagements with 
the companies they cover, and 
quantitative data from a variety 
of external sources.

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Case study
Unilever has made environmental sustainability a core part of its strategy. It is the only company 
I cover that has asked shareholders for an advisory vote on its net zero plans (it wants all 
its household products to be free of fossil fuels by 2030) and has integrated environmental 
sustainability into management incentive targets. While the company has set challenging targets, 
however, it has not consistently met them. The ratings have captured this discrepancy and we’ve 
been engaging with the firm to find out why, and what the challenges are in helping consumers 
make carbon-saving choices, e.g. using lower temperature detergents or dry shampoos that cut 
down the number of showers taken.
see if my overall letter rating makes sense. Where I 
find companies with the same score but a different 
letter, it prompts me to reflect on whether this is 
justified or not. I have adjusted a couple of ratings 
on this basis, and the overall result has been a 
wider distribution and fewer issuers achieving the 
overall highest A rating.  
Where do you find the information necessary to 
score companies on different factors?   
I typically start by analysing company publications 
and complement that with my existing sector 
knowledge. I further research areas where I have 
more questions and follow up with investor relations 
or senior executives. Then I use a range of tools to 
help me track corporate developments.
I also assess the targets that companies set, how 
stretching they are, and a firm’s track record of 
achieving past targets. For net zero targets, we 
look at the level of detail provided in a company’s 
plans, and how they track progress. Some 
companies have yet to publish net zero plans which 
I view negatively when it comes to scoring. 
The Ratings 2.0 framework allows for greater 
nuance, e.g. the distinction between the 
percentage of energy vs electricity derived 
from renewable sources or where companies 
are not clear about their water usage or waste 
management along supply chains. Once we have 
identified areas of concern, particularly this year 
around biodiversity, we can push companies to 
improve their disclosure and share best practice. 
Many consumer goods firms have a “Sustainable 
Agriculture Code” that ensures that farmers follow 
sustainable practices, but the more comprehensive 
Ratings 2.0 framework details both the leaders 
and those with whom Fidelity needs to engage 
more intensively to drive change. 
Ratings 2.0 also enables a deeper dive on social 
factors, so I typically assess a company’s safety 
procedures, code of ethics, supplier code of 
conduct, privacy policies and marketing policies 
(particularly important for alcohol, tobacco, and 
infant formula). I pay special attention to employee 
engagement scores, turnover rates, whistleblowing 
policies and workplace fatalities (particularly in 
Once we have identified 
areas of concern, particularly 
this year around biodiversity, 
we can push companies to 
improve their disclosure and 
share best practice.

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beverages), especially where companies claim  
to survey their employees on these issues but  
don’t publish the results or exclude parts of  
their workforce. 
What extra insights has Ratings 2.0 given you? 
The increased granularity and the ability to 
draw in different data points have given me 
a more complete picture and helped raise 
my confidence levels around the ratings, and 
their impact on valuations and investment 
cases. One example is that I now spend more 
time considering employee perceptions of 
the company they work for. This reflects both 
whether employees have truly bought into 
management’s agenda at a strategic level, but 
also whether they feel taken care of.  
I have not made any rating changes on this 
basis, but it has confirmed my view of one 
company that had already been rated a Sell 
due to concerns around governance. Ratings 
2.0 also allows me to incorporate event-
driven news more quickly into my investment 
recommendation, especially if I’ve already 
identified an ESG red flag. Ratings can be 
reviewed at any time, but we’ll often look at 
them when companies issue annual ESG reports 
or formal updates. The information we collect 
helps capture ESG trajectories and provides 
context for future investment case reviews.
What are the benefits of an investment 
analyst rating companies as opposed to  
an ESG analyst? 
The main advantage is that the discussion with 
management becomes much more strategic. As 
financial analysts, we regularly host meetings 
with CEOs and CFOs of companies. This allows 
us to judge their true commitment at the most 
senior levels and we see it as a red flag if they 
are not well versed in discussing ESG issues. 
Another benefit arises from assessing board 
composition. Due to our sector coverage, 
we have often already met with new board 
members that are industry experts in their 
previous executive roles, e.g. the previous CEO 
of Remy joining the board of Danone. We 
therefore often have direct knowledge of their 
execution track record and key strengths and 
can formulate a view of their effectiveness as 
board members. That said, we work closely with 
our sustainable investing colleagues on a range 
of engagements, particularly where they apply 
across the coverage universe.
 
How do the sustainability ratings sit alongside 
financial ratings?
The ratings are done completely separately, 
and I do my best not to bias sustainability 
assessments towards my stock ratings.  
However, I have found that the highest quality 
companies have tended to be the most 
advanced when it comes to sustainability. I 
believe this is because they have greater control 
over their performance, freeing up time to think 
longer term and more strategically. There are 
instances where sustainability ratings have 
filtered through into stock ratings: for example, 
I recently downgraded a stock where I felt the 
management incentive programme was not 
fit for purpose. In tobacco, the commitment to 
Ratings can be reviewed at 
any time, but we’ll often look 
at them when companies 
issue annual ESG reports or 
formal updates.

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Sustainable Investing Report 2022: ESG 2.0
transition consumers to healthier alternatives is 
critical, and this has influenced my preferences 
and stock recommendations. 
What practices are you looking for in a 
consumer company that are good or bad 
ESG wise? 
I don’t just look for the absence of negatives, but 
also for positives. For example, Nestle fortifies 
many products sold to lower income consumers in 
emerging markets with micro-nutrients, based on 
their mapping of the most common deficiencies. 
Equally, companies like Proctor & Gamble haven’t 
signed up to major plastics initiatives such as that 
organised by the Ellen MacArthur Foundation, but 
our engagement with Proctor & Gamble revealed 
credible targets on plastics.
I also look for a history of incorporating ESG 
principles into a company’s culture. Some 
companies have been highlighting ESG topics to 
investors for many years, especially in relation 
to diversity and employee welfare. I do recall 
times when investors used ESG presentations 
as “Blackberry breaks”.  But most of these 
companies now have ESG far more ingrained 
in their corporate cultures than those that 
have adopted it more recently on the back of 
pressure from capital markets. They also tend to 
have better disclosure, not just around company 
activities but via transparent product labelling 
and sustainability awareness campaigns on 
topics like clothing and plastic. 
And finally, I look closely at whether a company 
is on an improving or deteriorating trajectory in 
terms of its sustainability rating. This helps me 
understand the nature of the ESG-related risks or 
opportunities that are emerging and that could 
have a significant positive or negative financial 
and/or non-financial impact. 
Visit our website to discover more about our 
ratings process and watch a walk-through. 
Most of these companies now 
have ESG far more ingrained 
in their corporate cultures than 
those that have adopted it more 
recently on the back of pressure 
from capital markets.

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High impact: The pursuit of outcomes
Investing is no longer just about managing risk; 
it is increasingly about having a positive impact. 
This is partly driven by asset owners, who wish 
to deploy capital towards solving problems like 
climate change and biodiversity loss while also 
generating a financial return, and by regulators, 
particularly in Europe.
That said, in the absence of a globally accepted 
framework, investing for impact can mean 
different things to different people, and investors 
take a range of approaches depending on their 
organisation’s goals and methods of integration.  
Influencing change  
At Fidelity, we think of investing for impact in a broad 
and holistic way. The way in which we integrate 
sustainability into our bottom-up investment processes 
for traded securities aims to achieve an impact 
via the investment decisions we make and the 
engagements that our ratings prompt or respond to. 
This active investing and stewardship approach 
allows us to have an influence on issuers across 
asset classes. Indeed, a range of strategies 
and policies are needed if all products aim to 
contribute positively to solving broader social or 
environmental problems alongside generating a 
financial return.  
Influence is a subtle and nuanced part of the 
process of investing that means we cannot 
always pinpoint its exact effects on company 
managements. Nonetheless, we can monitor 
where companies are making profound changes 
in the wake of conversations we’ve had with 
them. We can also seek to influence change on 
a system-wide basis, across whole industries and 
portfolios. Here too identifying the tangible impact 
can be tricky as system-wide change, such as in 
public policy, can take time and is often achieved 
via a set of incremental steps rather than an 
overnight transformation. 
At a portfolio level, our influencing approach 
is informed by tools such as our sustainability 
ratings (see page 13), our Principal Adverse 
Impact analysis, and our SDGs mapping. These 
direct allocation and engagement decisions are 
framed by our Climate Investing Policy and our 
Emilie Goodall   
Consultant, Impact Investing 
Adrian Benedict  
Head of Real Estate Solutions
At its essence, impact investing is about delivering outcomes for people and the planet alongside financial 
outcomes. Investors can have a positive effect across all asset classes, although the nature of influence will 
vary. Investors are increasingly grappling with the pace of positive change already underway and starting 
to appreciate the role that real estate can play in accelerating their impact investing ambitions.

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deforestation commitment that are designed to 
push for change on a system-wide basis.  
We also consider the risks of our various 
approaches to influencing company behaviour in 
a way that is similar to how we analyse financial 
risk/return profiles. Primarily, there is a risk that 
the changes we hope to encourage do not 
come to pass. This brings with it reputational risk 
if we engage intensively with a company on a 
particular issue throughout our investment and 
it continues its harmful practices. There is also 
the risk of unintended consequences given the 
interconnectivity of ESG factors, which we seek 
to assess and mitigate via our deep research 
capabilities into individual companies and sectors.  
However, these risks must be balanced against 
the risks of inaction, and the potential return from 
acting in terms of the societal and environmental 
benefits. For example, if we have the chance of 
encouraging a company to improve its environmental 
status, or to influence a positive system change that 
influences the ‘rules of the game’ for a wider group 
of companies, then even if our original targets for 
change are not quite met we may still have had a 
meaningful positive impact.  
Our influencing framework is at a nascent stage, 
and we are looking to expand our stock of 
influencing tools and to draw stronger threads 
between possible actions that are mutually 
supportive across the levels of influence. 
Importantly, the development of this broader 
framework is happening alongside and 
complementing the growth of impact investing 
in the more narrow and traditional sense within 
private assets, both at Fidelity International and 
across the asset management industry.  
Spotlight on real estate 
More than any other asset class, real estate is 
perhaps the most tangible (‘bricks and mortar’) 
in terms of its potential for impact. When it comes 
to climate change, for example, not only is the 
built environment one of the biggest sources of 
emissions, accounting for around 40% of carbon 
emissions globally and up to 60% to 70% in 
cities, but the sector also offers some of the most 
tangible opportunities to cut those emissions. 
While investors can buy new assets built to higher 
environmental standards, the biggest scope for 
achieving impact lies in the buildings that exist 
today, most of which are expected to still be 
around by 2050. Refurbishing and retrofitting 
these buildings can both reduce the carbon 
footprint of our built environment and improve the 
wellbeing of those who use them.  
While any sort of building work has financial and 
environmental costs, retrofitting older assets cuts 
a significant portion of the upfront embodied 
carbon (the emissions created from a building’s 
construction) which is irreversible. Improving energy 
efficiency, using more sustainable materials, 
and sourcing cleaner forms of energy can also 
cut existing emissions and have a measurable, 
verifiable, and additive impact. Not only can 
we ensure that renovated buildings adhere to 
the strongest performance standards, such as 
insisting upon Energy Performance Certificate 
(EPC) ratings of A or B and Building Research 
Establishment Environmental Assessment Method 
(BREEAM) ratings of excellent, but we can also 
seek to improve how the building is utilised in 
the long term, by targeting 100% green leases 
for sustainable use and using a tenant selection 
process that includes sustainability scoring of the 
potential lessees.  
As with influencing companies more generally, 
however, impact investing in real estate needs 
to be a collaborative effort, with landlords and 
occupiers working in partnership - perhaps 
through green leases or less formally - to achieve 
the desired outcomes.

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Allocating for climate change 
The effects of climate change, and the policies 
aimed at slowing it, will have profound effects 
on the global economy for decades to come. As 
a result, capital allocation within portfolios and 
across asset classes must consider how best to 
account for a changing world, aligning with global 
commitments to reduce greenhouse gas (GHG) 
emissions and mitigate physical and transition risks. 
At Fidelity, we have developed a framework for 
assessing the macro implications of different 
climate scenarios and how these may be altered 
by policy and technology shifts over time. We plan 
to embed these into our long-term capital market 
assumption models. At the same time, more ways 
of allocating to climate are springing up. Here we 
look at a few of them. 
Equities
There are several ways equity investors can seek 
to avoid the risks and take advantage of the 
opportunities presented by the transition to net 
zero. Exclusion is one approach. Investors can 
use a negative screening overlay to remove the 
highest emitters from their investment universe. 
However, by not engaging with these firms, 
investors have little or no impact on emission cuts.
Another option is a so-called best-in-class 
approach, in which companies that lack an 
appropriate set of carbon emission reduction 
targets are underweighted, while exposure to low 
emitters, or those with ambitious energy transition 
plans, is increased relative to a benchmark. 
This might appeal to investors that want exposure 
to those companies least affected by transition 
and physical risks while maintaining greater 
diversification than can be provided by excluding 
sectors or focusing on a narrower universe. 
However, the impact on emissions and on the 
pace of the transition may also prove to be 
limited. 
Investors may therefore wish to allocate some 
of their equity portfolio to strategies that capture 
different aspects of the environmentally-aware 
universe via thematic funds that focus on, for 
example, companies whose products offer climate 
solutions such as improved water efficiency and 
waste management, renewable energy technology 
and energy efficiency. Such approaches may 
be less diversified than broader equity funds but 
may appeal to investors seeking clear, positive 
environmental outcomes from their investments.
Climate investing via equities, as with other asset 
classes, is not without its pitfalls. Challenges 
remain in finding clear and verifiable disclosures 
on Scope 3 emissions, across the entire value 
chain of the company, which often make up the 
lion’s share of GHG emissions, particularly for the 
biggest emitters such as energy firms. Therefore 
Matthew Quaife 
Head of Multi Asset Investment Management, 
Asia
Eugene Philalithis 
Head of Multi Asset Investment Management, 
Europe

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Sustainable Investing Report 2022: ESG 2.0
investors who want to make a difference often 
invest with a transition mindset, engaging heavily 
with issuers on their net zero transition plans and 
employee reskilling to drive lasting change.
Fixed income
Green debt is different to green equity in that 
the proceeds can be directly used to finance 
initiatives to cut GHG emissions and align 
portfolios to climate targets, such as the 1.5˚ 
target agreed at the Paris UN summit. 
This can be achieved to a limited extent through 
investing in green bonds, which must typically 
finance, or refinance, eligible green projects, 
and report on use of proceeds. For example, the 
World Bank has issued green bonds to finance 
renewable energy and clean transport projects. 
Meanwhile, climate-aligned bonds are those that 
are not labelled as green by the issuer but still 
contribute towards initiatives and projects that 
support the transition to a lower carbon economy. 
Sustainability-linked bonds include provisions 
to penalise the issuer with increased coupons 
or reinvestment rates if they fail to meet targets 
linked to, for example, the extent to which green 
energy is used in their energy mix.
However, such products are still few relative to the 
size of the global bond market. Instead, investors 
are increasingly viewing traditional fixed income 
securities as a means of engaging proactively on 
climate, whether along the lines of best-in-class or 
by owning the debt of firms leading the charge 
on the transition. Often brown bonds finance the 
same projects as green bonds but with a lower 
premium, while the more frequent refinancing of 
brown bonds provides opportunities to engage 
more intensively, especially with higher emitters in 
hard-to-mitigate sectors. 
As with equities, investors seeking impact may 
seek to fund the transition by identifying high 
emitting companies with robust transition plans 
they can get behind, thereby supporting big 
reductions in emissions and setting industry  
best practice.
Private assets
Private markets can be used to access a wide 
range of investments aimed at reducing carbon 
emissions, often focused on the infrastructure 
and energy sectors. Private investment firms offer 
portfolios of equity stakes in companies that 
provide renewable energy sources such as solar 
and wind.
These companies typically have reliable revenue 
streams derived from long-term contracts to provide 
energy to corporate or government clients, making 
returns relatively stable and attractive to investors 
seeking more predictable income streams. 
Gaining exposure to early-stage clean energy 
companies, such as those focused on cutting edge 
battery and hydrogen technology, is often only 
possible through private investments. The revenue 
streams for these companies may be more volatile 
than more traditional clean energy providers, but 
potentially reap higher rewards. However, investors 
need to be aware of potential illiquidity risk, 
alongside investment risk. 
Conclusion
Overall, we believe that the huge changes 
associated with climate change, both physical and 
transition-related, will become the main driver of 
global capital flows this century. Getting ahead of 
these through a multi-vehicle climate allocation with 
different diversification and risk characteristics will 
be critical in protecting portfolios against emerging 
challenges while also enabling them to capitalise 
on the potential opportunities.

Section 2: Active 
ownership at Fidelity

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Sustainable Investing Report 2022: ESG 2.0
Fidelity’s approach to active ownership comprises 
the engagement and voting activity we undertake 
to gain a deeper understanding of a company’s 
approach to ESG and to use our influence 
to improve the sustainability practices of the 
companies we own.
This approach supports the responsible allocation 
of client assets in two main ways: by informing the 
investment process at the research and investment 
decision-making stages and through leveraging 
our ownership position in companies to effect 
positive corporate change such as development of 
policies or targets or improvement of processes.
Engagement and voting at Fidelity 
Active engagement forms an integral component 
of our sustainable investing strategy. We use 
information gathered from engagements to 
inform our investment decisions and to encourage 
company management to improve procedures 
and policies. We believe engagement is key to 
improving issuer behaviour and investor outcomes 
over the long term.
We conduct engagements throughout our 
investment universe and cover various regions, 
geographies, and asset classes. For further 
information on how we approach engagement 
across different asset classes, please refer to our 
UK Stewardship Code Submission.
Voting is a fundamental part of our engagement 
with investee companies and is underpinned 
by objectives of upholding good corporate 
governance standards across our equity holdings, 
preserving shareholder rights and supporting 
companies that are sustainable, responsible, and 
accountable to their shareholders. Our voting 
process is highly collaborative and draws on the 
experience of our wider investment team to inform 
our final decision. While voting is mostly limited to 
our equity holdings, the research and engagement 
process surrounding our voting activities is 
leveraged across our investment team.
Read more about our engagement approach in 
our Engagement Policy. 
2021 update to our voting 
principles and guidelines 
In July 2021, we updated our Voting Principles 
and Guidelines to incorporate sustainability 
considerations further into our voting decisions at 
company meetings and to set universal minimum 
expectations on a range of governance issues.   
Two key areas that were updated relate to board 
diversity and climate change. In the case of board 
gender diversity, we will consider voting against the 
election of directors where boards do not have at 
least 30% female representation at companies in 
the most developed markets (including the UK, the 
EU and Australia) and 15% female representation in 
other markets. This policy aims to improve gender 
balance at the board level, but also catalyses 
broader discussions beyond gender diversity and 
the board.
Our policy also encourages improvement on 
climate change strategy, governance, and 
disclosures, providing a clear set of criteria that 
we believe companies should be achieving to 
effectively address climate risks and opportunities
The updates also introduce a shift in how we 
approach shareholder proposals, taking a more 
holistic view of factors when determining our 
final decision. 
To review the updates and approach in full visit 
our Voting Principles and Guidelines →

Engagement in 2021
Engagements by sector
Engagement mode
Engagements by region
Engagements by year and type 
Meetings with company representatives
Topics engaged by theme and type (voting/non-voting)
200
400
600
800
1000
0
Climate
E
S
G
Nature
Employees
Customers
Communities
Oversight
Incentives
Strategy &
reporting
0
200
400
600
800
1000
1200
1400
1600
Voting
Non-voting
2019
2020
2021
Other board members
Other company
representatives
Investor relations
Chair/lead director
C-suite
257
205
88
86
42
Conference call 39%
Written
correspondence 54%
In-person 7%
Voting
Non-voting
0%
20%
Americas
Asia
Europe ex UK
MEA
Oceania
United Kingdom
40%
60%
80%
100%
2020
2021
Communications services
Consumer discretionary
Consumer staples
Energy
Financials
Healthcare
Industrials
Information technology
Materials
Real estate
Utilities
71
165
96
37
176
92
161
99
126
42
47
*While important interactions that inform the investment theses of our analysts and portfolio managers, these meetings do not constitute engagements under the UN PRI’s Reporting Framework. 2021 figures include private 
issuers and meetings undertaken by Fidelity Canada.
Source: Fidelity International, 2022. 
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Sustainable Investing Report 2022: ESG 2.0
1,464
Number of  
engagements
20,000
Number of  
company meetings*
1,113
Companies  
engaged
51%
Share of virtual or in-person 
engagements held with 
C-Suite or chair/lead director

Voting in 2021
E
Meetings with votes against management by region 
% of meetings with votes against management over time
How we voted on different proposals 
Top reasons for voting against directors
Shareholder proposals supported
S
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
0%
10%
20%
30%
40%
57%
57%
79%
Asia
Americas
38%
36%
UK
MEA
53%
Oceania
32%
Europe
53%
Japan
36%
20%
Proposal Type 
Votes against management 
Remuneration  
1197
Charter Amendments
133   
Strategic/Restructuring
69   
 
 
Board
1483 
  
 
 
 
Capital Structures 
338   
 
 
Routine Business
462   
 
Takeover Related  
39   
 
Auditors
Total
119   
22%
12%
9%
7% 
7%
7%
7%
5%
3840 
Proposal Type 
Votes against management  
1. Independence
569
2. Diversity
201   
3. Conduct
112   
4. Remuneration 
173   
 
 
5. Other 
99  
8%
*Fidelity submitted votes at 4,310 of 4,424 meetings. We did not submit votes in instances where voting impediments prevented us from doing so. For more information, see our Voting Principles and Guidelines.
**Votes against management refers to instances where Fidelity voted contrary to the board or management’s recommendation on a given proposal.
Source: Fidelity International (2022), ISS (2022). 
Further information about our approach to  
engagement and voting can be found in our latest  
UK Stewardship Code Submission
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Sustainable Investing Report 2022: ESG 2.0
4,310
Total meetings* 
(97% of total)
9%
Proposals we voted 
against
38%
Meetings where 
we voted against 
management**
648
Companies where we 
voted against directors 
(823 directors at 19%  
of companies)

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Sustainable Investing Report 2022: ESG 2.0
At Fidelity, we continually review how we prioritise and focus our active ownership efforts. As part of this 
process, we select key themes annually that help guide our engagements. In this section we review the 
progress made on our 2021 sustainable investing themes and introduce the new focus areas for 2022.
Key themes for 2021 
2021 was a year of continued momentum for sustainable investing. The Covid-19 pandemic continued to 
evolve and have widespread economic and social impacts globally. At the outset, we identified three key 
sustainable investing themes for 2021 that guided our interactions throughout the year.  
Climate  
and natural 
capital
Employee 
welfare
Digital ethics
Our climate and natural capital engagement considered the growing awareness of the 
measurable financial risks posed by climate change, resulting in the destruction of natural 
capital and the loss of biodiversity. In 2021, we continued working with companies to raise 
the bar on climate-related disclosures; for example, leading engagements with some of the 
world’s largest GHG emitters as part of the Climate Action 100+ group (see page 34). We 
also increased our work with companies on other specific climate related risks. For example, 
we took part in a collaborative engagement with several other asset managers to track 
deforestation across the supply chain using satellite data as well as continuing to engage 
on palm oil (see page 42). As outlined above, we updated our Voting Policy and Guidelines 
to serve as a key lever for engagement to hold companies to account in relation to the 
ambition of their climate strategies. Finally, at COP26, we committed to eliminate the risks of 
commodity-driven deforestation from our portfolios by 2025, underpinning our commitment to 
addressing climate change.
In 2021 the ‘S’ in ESG sprang to prominence for companies and investors. Social issues 
stemming from the pandemic became a key component of sustainable post-pandemic 
recovery plans, as companies faced increased workforce and supply chain pressures. 
Focusing on modern slavery (see page 53) and employee welfare, during the year we 
engaged with companies on their Covid-19 remuneration structures (see page 58) and 
increased engagements on other key social issues.
Promoting digital ethics as a theme recognised the importance of digital inclusion as a critical 
factor in the digital economy. While many investors are aware of the tremendous opportunities 
enabled by the digital economy, there has been less understanding of and attention paid to 
the potential risks. With this in mind, in 2021 we further developed our engagement framework 
for “digital ethics” that we had established in 2020. The key pillars of this framework include: 
cybersecurity, data governance and privacy, misinformation, online welfare, and ethical artificial 
intelligence. We engaged directly with numerous technology companies on these issues, seeking 
to better understand their approaches and to promote more disclosure and better practices. We 
established ourselves as the lead investor on a collaborative engagement initiative that is being 
launched by the World Benchmarking Alliance (WBA) in 2022 specifically to address concerns 
related to ethical artificial intelligence.
Sustainable investing themes

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Sustainable Investing Report 2022: ESG 2.0
Key themes for 2022  
Outcomes from COP26 and our renewed emphasis on materiality shifted our engagement priorities as we 
entered 2022. Building on our themes from 2021, we have identified three key themes for our engagement 
this year:
Deforestation
Just transition
Double 
materiality
Forests play a critical role in climate change mitigation and biodiversity preservation: they 
are home to 80% of the world’s biodiversity and serve as carbon sinks, absorbing a third 
of the CO2 released from burning fossil fuels. But despite the important role they play, 10m 
hectares of existing forest cover are still lost each year (this is concentrated in areas where 
the carbon storage capacity of trees is higher than average) while the rate of reforestation is 
declining according to the Food and Agriculture Organisation.  As a result, there has been an 
average decline in biodiversity of 68% since 1970 (according to the World Wildlife Fund), while 
the impacts of climate change become ever more apparent. 
As responsible stewards of capital, we have a fiduciary duty to protect our clients’ capital 
and deliver long term sustainable returns. Unabated loss of our forests will undermine the 
ecosystem services on which over 50% of global gross domestic product (GDP) is moderately 
or highly dependent (according to the World Economic Forum), and it is inconsistent with our 
commitments to achieve net zero. 
Across the globe, we must work collaboratively to decarbonise as rapidly as possible if we 
are to stem the fallouts from climate change. But efforts to decarbonise should not leave 
certain groups of individuals or communities whose livelihoods are dependent on fossil fuels 
or carbon intensive industries behind, either economically or socially. When engaging with 
companies on climate change and implementing our own decarbonisation strategy, we 
explicitly integrate the principle of a “Just Transition”, pushing companies to consider the 
social implications of their decarbonisation approach. A Just Transition also forms a core 
aspect of our thematic engagement on thermal coal, where energy security implications and 
inclusivity are embedded in the engagement’s objectives (see page 39).
Double materiality recognises that companies are not only responsible for managing the 
financial risk of the social and environmental factors upon which they depend. Companies 
are also responsible for the actual impact that their business has on people and the planet. 
The concept of double materiality forms the foundation of our proprietary sustainability 
ratings and engagement activities. Double materiality also speaks to how we view Fidelity’s 
own sustainability footprint. It is embedded in what we do, rather than standing as a distinct 
concept on its own.

Environmental

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Sustainable Investing Report 2022: ESG 2.0
Climate 
A large and growing share of our stewardship activity is focused on climate change and  
its related risks, which we believe is the most significant long-term systemic risk facing  
investee companies. 
As outlined above, in 2021, we launched our 
Climate Investing Policy and to meet the ambitious 
goals outlined in our policy we emphasised the 
crucial role of climate stewardship. From routine 
company dialogues and proxy voting to focussed 
transition engagements, we believe embedding 
climate change in our investment stewardship will 
be critical to catalyse and accelerate the transition 
to net zero. 
2021 also saw the announcement of our 
revised Voting Principles and Guidelines, 
with a commitment to vote against directors 
at companies that we believe are failing to 
adequately address the risks and opportunities 
posed by climate change. 
We expect investee issuers to have policies in 
place to reduce carbon and other GHG emissions. 
They should also be able to adhere to potential 
regulation on climate change, as well as have a 
strategy to reduce Scope 3 emissions and to make 
assumptions about carbon pricing.
Our policy explicitly identifies minimum standards 
that we expect issuers to adhere to including 
setting and reporting on ambitious targets 
aligned to the UN’s Paris Agreement on climate 
change.  The expectations captured in our policy 
are applicable to all issuers in which we invest, 
extending to a range of asset classes beyond 
equities including fixed income and private assets, 
where we may not have voting rights.
Through our engagement, voting, and 
collaboration in industry initiatives, we are 
determined to ensure that the decarbonisation of 
our investment portfolios is aligned to the goals of 
the Paris Agreement.
For more information about our climate stewardship approach,  
visit our Climate Investing Policy and Voting Principles and Guidelines. →
Our policy explicitly identifies 
minimum standards that we expect 
issuers to adhere to including setting 
and reporting on ambitious targets 
aligned to the UN’s Paris Agreement 
on climate change.

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Climate change is a key and increasing focus 
of our corporate engagements. In 2021, our 
fundamental and sustainable investing analysts 
engaged extensively with companies to  
improve the ambition of climate change 
strategies and quality of disclosures in over  
five hundred engagements.
In these interactions, we promote 
decarbonisation strategies aligned with the 
Paris Agreement goals and disclosures of GHG 
emissions data across all scopes. We also 
advocate for TCFD-aligned reporting that clearly 
defines oversight and responsibilities for climate 
strategy, and assessments of climate-related 
financial risks and opportunities.
Beyond direct dialogues, we believe industry 
collaboration is imperative to support our ambition 
of a low-carbon transition. Our involvement with the 
Institutional Investors Group on Climate Change 
(IIGCC) and Climate Action 100+ initiatives is a 
critical aspect of our collaborative engagement on 
climate, and examples of this are detailed in two 
case studies below. Our engagement also extends 
to policymakers, where we regularly contribute to 
public consultations on financing the transition to net 
zero and the role that asset managers can play.
5
Climate Action 100+ engagements 
where Fidelity is a co-lead or 
participant. 
528
Engagements on climate change, 
including energy consumption and 
GHG emissions. 
Committed to phase-out 
thermal coal from our 
portfolios by 2030 in OECD 
markets and by 2040 
globally, via intensive and 
time-bound transition 
engagements.* 
*For further information refer to our Climate Investing Policy. 
Source: Fidelity International, 2022.  
Source: Fidelity International, 2022.

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Sustainable Investing Report 2022: ESG 2.0
BHP Group   
Reason for Engagement:	
Fidelity’s managed funds have a substantial combined 
position in the company. We meet with company 
representatives regularly in the context of our active 
management and analysis. In 2021 our engagements 
focused on the development of the company’s climate 
strategy, following extensive engagement in 2020 on its 
work with its communities. 
Details of Engagement: 
In July 2021, Fidelity’s investment team met with the 
chair of BHP. We discussed the company’s climate 
scenario analysis, decarbonisation target-setting, and 
its engagement with industry associations over climate 
policy. The board’s view is that the company’s exposure to 
copper, nickel, and steel/iron ore holdings means it is well 
positioned for the shifting demand patterns associated 
with the low-carbon transition. 
While the company has set Scope 1 and 2 carbon 
reduction targets, it has found it challenging to set 
meaningful Scope 3 (i.e. indirect emissions reduction) 
targets, reasoning that there is not yet a clear pathway 
to achieving them (although they have set targets around 
product shipping and procurement). We advised there 
is a need for metals & mining companies to set Scope 
3 targets and that this requires greater attention at the 
industry association level, and we strongly encouraged the 
company to pursue setting science-based targets, noting 
that many of the company’s Asia-based steel producing 
clients are starting to set their own targets. The chair 
agreed that greater client uptake of target setting would 
help but suggested that the public’s attention needed to 
shift from a focus on targets to outcomes.
We also expressed concern about the market-wide failure to 
factor carbon impact into commodity prices. BHP operates 
with its own internal carbon price, but the chair agreed that 
disclosure on product carbon intensity needed to improve. 
Following our discussions earlier in the year, during Q4 we 
took the decision to abstain on BHP’s climate transition 
plan, which the board submitted to a shareholder 
vote at the AGM. While we assessed the company 
as having made substantial progress on its climate 
disclosures, governance, and target setting during the 
past several years, we did not believe that its Scope 3 
emissions reduction targets were ambitious enough to 
merit support, particularly since the company envisaged 
providing shareholders with a vote on its climate plan 
only once every three years. At the AGM, we supported a 
shareholder resolution asking the board to report on how 
its capital allocation to various types of fossil fuel assets 
will align with a 2050 net zero emissions scenario. 
Following the vote, we have been engaging with the 
company and other iron ore miners to see how they 
can play a bigger role in the reduction of their Scope 3 
emissions, including exploring practical solutions whereby 
Scope 3 target setting could become fully controllable. 
These efforts are ongoing. 
We also hosted a call with BHP in December 2021 to discuss 
the issues surrounding the diesel fuel rebates scheme in 
Australia. We highlighted the pressure we were seeing from 
activists, superannuation funds, and industry groups on this 
issue, and encouraged the company to move proactively 
with other major miners to address this emerging risk to their 
social license to operate. These are ongoing conversations, 
which we will continue to report on as they evolve. 
Case study

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Fidelity International
Sustainable Investing Report 2022: ESG 2.0
Climate Action 100+
Details and Outcomes of Engagement
We are co-lead investors in the collaborative engagement 
with Sasol, South Africa’s largest integrated energy and 
chemicals company, which commenced in 2020. So far, 
the company has been receptive to our feedback. It has 
made significant progress in developing and implementing 
its climate strategy, notably releasing its 2030 and 2050 
decarbonisation roadmaps in 2021. 
Sasol is one of the highest emitters in Africa and hence its 
combined Scope 1, 2 and 3 emissions make it systematically 
important in the global transition to net zero. The company 
plays a central role in the South African economy, providing 
energy security as well as many jobs. Therefore, the 
company’s decarbonisation plans must consider the broader 
socio-economic consequences, to achieve a just transition. 
In the first half of 2021, Sasol announced that it planned to 
increase the ambition of its transition plan, with publication 
of updates expected at its Capital Markets Day in 
September. Throughout 2021, leading up to the publication 
of the updated plan, Fidelity and the Climate Action 100+ 
investors engaged in constructive ongoing discussions 
with the company. Ahead of the Capital Markets Day, we 
communicated our expectations for Sasol’s decarbonisation 
strategy to the company’s board and executive leadership 
team. This included our expectation that Sasol publish a 
transition plan through to at least 2030 consistent with the ‘Just 
Transition’, plus details of how the company’s capital allocation 
will support the transition. We also called on Sasol to align 
with the Climate Action 100+ Net-Zero Company Benchmark.
When Sasol published its 2021 Climate Change Report at 
its Capital Markets Day, we were pleased to see that the 
report addressed several of the key areas that we had 
highlighted, indicating a marked increase in the ambition of 
its climate strategy. 
Case study
The report included a commitment to achieve net zero by 
2050, as well as increased ambition of the company’s Scope 
1 and 2 targets from a 10% reduction by 2030 to a 30% 
reduction (vs 2017 baseline). The company has also set a 
target to reduce its Scope 3 emissions from the company’s 
energy business by 20% by 2030 (vs 2019 baseline). In 
addition, the company laid out roadmaps to guide on GHG 
emissions reductions for its Energy and Chemicals business 
and a 2050 roadmap for the Energy Business. 
While the Climate Change Report demonstrated 
encouraging progress for Sasol, we believe that gaps 
remain in the company’s transition plans. Crucially, Sasol’s 
decarbonisation roadmaps are still not consistent with a 
1.5°C pathway. Climate Action 100+ investors continue to 
engage with Sasol, shifting their focus to the execution of the 
company’s decarbonisation plans and the inclusion of short-
term (pre-2026) milestones. In the near term, our discussions 
will also look to highlight the impact that GHG emissions 
could have on the company’s cost of debt, with a major 
refinancing of Sasol’s capital structure pending in 2022.
During the year, we have also been monitoring the progress 
of Grupo Mexico as we initiated engagement in 2020. 
The company released its 2020 Sustainability Report in 
July 2021, which included more information on governance. 
Responsibilities of the chair of the board of directors and 
the Sustainable Development Committee management 
are now explicitly outlined. The company has also aligned 
its reporting to the TCFD recommendation. It conducted 
a physical risk analysis as well as an analysis of the 
potential impact of increased carbon prices based on three 
scenarios including International Energy Agency, Sustainable 
Development Scenario and Intergovernmental Panel on 
Climate Change 1.5. Whilst several engagement milestones 
were met, we will continue our discussions with the company 
regarding their plan for reducing carbon emissions and 
setting robust targets.
Involvement
Climate Action 100+ signatory and participant in collaborative engagements.

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Sustainable Investing Report 2022: ESG 2.0
Through our revised Voting Principles and 
Guidelines we committed to vote against 
directors at companies that we believe are failing 
to adequately address the risks and opportunities 
posed by climate change. 
While we implemented this policy from January 
2022, we launched an extensive programme of 
engagements in the second half of 2021 to identify 
and address companies that fell short of our 
expectations. This included a letter sent by our 
Global Head of Research to over 1,300 companies 
outlining our expectations, which in turn led to a 
significant number of company dialogues.
We also witnessed a marked increase in the 
number of climate-related shareholder proposals 
at company meetings in 2021. Considering the 
universal materiality of climate change, we are 
broadly supportive of proposals that seek to 
increase disclosure and prompt more ambitious 
decarbonisation strategies, while avoiding overly 
prescriptive demands. We tend to apply an even 
higher standard to high emitters, recognising the 
significant transition and physical risks faced and 
perpetuated by these companies.
2021 also saw the emergence of several Say-
on-Climate proposals, where companies offered 
shareholders an advisory vote on the current 
climate strategy, or progress against it. We are 
broadly supportive of the initiative as we believe 
the proposals offer another mechanism for 
shareholders to signal their views around transition 
strategy. However, as exemplified in our case 
study with BHP outlined in this report, we think it is 
important to appropriately scrutinise plans for these 
mechanisms to have the intended effect.
1,300+
Letters sent to companies about our new voting 
policy, including our expectations for climate 
change strategy, disclosures and oversight.
58%
Votes against management on climate
-related shareholder proposals* (40/69).
*Including abstentions
Source: Fidelity International (2022), ISS (2022).

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Fidelity International
Sustainable Investing Report 2022: ESG 2.0
ESG Analyst Survey 2022: Tracking the transition 
Fidelity recently launched its second annual ESG 
Analyst Survey, which tracks the different elements 
of the corporate transition towards net zero. Despite 
the impact of the Russia-Ukraine war, and an 
increase in the immediate demand for fossil fuels to 
bolster near-term energy independence, this year’s 
survey captures signs of progress.
Among regions, Europe is still out in front on the 
road to net zero, with analysts covering the area 
reporting that more than half their companies are 
“leading the charge”. Globally, analysts say most 
companies are starting to change. 
There has been little shift in the number of analysts 
who are confident their companies’ emissions 
targets are ambitious enough to meet net zero 
by 2050, a reminder that changing attitudes and 
behaviours will be a long-term process.
  
 
 
 
 
However, the proportion of our analysts who say 
Chinese companies will meet net zero by 2050 
has more than doubled from last year to 65 per 
cent. One analyst covering Chinese industrials 
says: “Given the priority that China puts on net zero 
and increasing investor awareness, most Chinese 
aviation and logistics companies have started 
initiatives on the energy transition”.
Ben Traynor 
Senior Investment Writer
“When it comes to the transition to a low carbon economy, what proportion of your companies are 
likely to take the following actions.” Source: Fidelity International ESG Analyst Survey 2022.
Chart 2: Europe still leading the charge on  
net zero
Leading the charge
Starting to change
Unlikely to act
Global
Europe
North America
Japan
Asia Pacific (ex China ex Japan)
EMEA/Latin America
China
0%
20%
40%
60%
80% 100%
“How confident are you that your companies’ emissions targets are ambitious enough to meet net 
zero by 2050?” Scale of 1-7, where 1 is not confident at all and 7 is very confident. Charts show the 
proportion answering 5-7 (confident that targets are ambitious enough). Source: Fidelity International 
ESG Analyst Survey 2022. 
Chart 3: Increasing confidence that Chinese 
companies can meet net zero by 2050
2021
2022
Global
Europe
China
Japan
North America
Asia Pacific (ex China ex Japan)
EMEA/Latin America
0%
20%
40%
60%
80%

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Fidelity International
Sustainable Investing Report 2022: ESG 2.0
Several other China-focused analysts echo 
this sentiment that Chinese companies are 
responding to top-down cues following Beijing’s 
2020 announcement that it is targeting carbon 
neutrality by 2060, although others note that some 
of the country’s businesses are “still early in their 
ESG journey”.
As was the case last year, analysts in aggregate 
see more opportunity than risk from the green 
transition, especially over the long term. Japan 
stands out, with significant opportunities expected 
to emerge in autos, consumer staples and 
semiconductors over the next decade. China is also 
likely to benefit from green opportunities and is 
already a leader in areas such as solar panels.
“How significant are the potential business opportunities arising for your companies over the 
following timescales as a result of the transition to a low carbon economy?” Scale of 1-7, where 
1 is not significant and 7 is very significant. Charts show the proportion answering 5-7 (significant 
opportunities). Source: Fidelity International ESG Analyst Survey 2022.
Chart 4: Japan and China set to embrace 
transition opportunities 
Next 3 years
Next 5 years
Next 10 years
Global
Asia Pacific (ex China ex Japan)
China
EMEA/Latin America
Europe
Japan
North America
0%
20%
40%
60%
80% 100%
The survey also highlights areas of progress at 
company level. Analysts report an increase in the 
proportion of companies that now have biodiversity 
policies. Deforestation is one of Fidelity’s key 
sustainability themes for 2022 following a pledge 
we made alongside other investors at the time of 
COP26. Following this and a similar pledge by over 
100 countries, our analysts report an increase in the 
proportion of companies with policies specifically 
aimed at reducing deforestation from 27 per cent 
last year to 36 per cent this year. 
Of course, having a policy and having a good 
policy are two different things, and approaches to 
deforestation and biodiversity vary across sectors. 
One analyst covering European healthcare finds 
their companies’ biodiversity policies are “mostly 
just lip service, high-level and feel quite boilerplate, 
with very few concrete examples”, while one 
Europe-focused energy analyst says for his sector 
“emissions are the priority”.
“What proportion of your companies have policies in place to address deforestation?” Source: Fidelity 
International ESG Analyst Survey 2022.
Chart 5:  Deforestation climbs the agenda 
(slowly)
2021
2022
Global
China
Asia Pacific (ex China ex Japan)
Japan
Europe
North America
EMEA/Latin America
0%
20%
40%
60%
Deforestation is one of 
Fidelity’s key sustainability 
themes for 2022 following 
a pledge we made 
alongside other investors at 
the time of COP26.

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Fidelity International
Sustainable Investing Report 2022: ESG 2.0
The just transition is another core theme for 2022. 
Here we find a greater proportion of businesses 
than last year have announced initiatives to 
promote a just transition by supporting displaced 
employees. 
Energy stands out as a stark exception, however. 
Not only are there very few initiatives underway to 
retrain workers but in another survey question we 
asked, around 90 per cent of our energy analysts 
said the sector is highly vulnerable to future job 
losses. This suggests that workers are still more 
likely to shift sector entirely rather than take on 
new skills. 
Our third theme this year has been double 
materiality. For the first time, we asked our analysts 
what proportion of the companies they cover 
report on both their own activities’ impact on the 
climate and the impact of climate change on their 
business. Such reporting appears most prevalent 
among utilities companies followed by the energy 
sector, with IT at the back of the pack. 
“What proportion of your companies have announced intiatives to support employees displaced by 
the move to a low carbon economy over the next decade?” Source: Fidelity International ESG Analyst 
Survey 2022.
Chart 6: Just transition initiatives on the rise
2021
2022
Consumer staples
Healthcare
Utilities
Industrials
Consumer discretionary
Financials
Information technology
Materials
Telecoms
Energy
0%
20%
40%
Progress is slow - but it is 
happening
Transitioning to a sustainable economy is fraught 
with challenges. Progress is slower than we would 
like but it is happening. Identifying those companies 
taking concrete actions - such as tackling their 
deforestation impact or mitigating the social 
impact of shifting to new technologies - is crucial to 
supporting the transition and allocating capital to 
where it can do the most good.

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Fidelity International
Sustainable Investing Report 2022: ESG 2.0
Holding directors accountable on climate change
We have been engaging extensively with 
companies since the launch of our new Voting 
Principles and Guidelines to ensure companies 
understand Fidelity’s principles and expectations 
for corporate behaviour across a variety of 
environmental, social, and governance-related 
issues. As part of this process, we have focussed 
on companies falling short of our expectations 
on the management of climate-related risks and 
opportunities, arranging one-to-one engagements 
with input from across our investment team (including 
analysts and portfolio managers) to promote action 
by companies on this urgent aspect of strategy.
Generally, we have seen promising signs from 
the majority of companies in focus, with many 
substantially enhancing their disclosures, target-
setting and governance around climate change in 
their FY21 reporting. Yet despite signs of progress, 
we are aware that many companies are still 
failing to adequately respond to the threats that 
climate change poses to their businesses, whether 
transitional or physical in nature. To ensure a 
transition to net zero which is aligned with the goals 
of the Paris Agreement, we will continue to engage 
with these companies to encourage greater 
ambition in their climate strategies. 
Systematically engaging on thermal coal 
exposures in our portfolios 
With the launch of our Climate Investing Policy 
in September, Fidelity announced a commitment 
to phase out issuers exposed to thermal coal 
by 2030 in OECD markets and by 2040 globally, 
consistent with the International Energy Agency’s 
“Net Zero Emissions by 2050” (NZE) scenario.
In line with our investment philosophy, we have 
decided to take an active engagement approach 
to tackle thermal coal exposures in our portfolios. 
The global thermal coal value chain and its incentive 
structures are highly complex, and we fear the 
unintended consequences of an exclusively exclusion-
led approach could be disastrous for our overarching 
aim: to achieve an inclusive decarbonisation of 
the global energy system which is aligned with the 
goals of the Paris Agreement.
Our engagement, which is commencing in 2022, 
will focus on identifying the systemic drivers 
behind the continued role of thermal coal in 
our energy mix and will seek to influence an 
expedited phase-out of unabated coal throughout 
our portfolios (and beyond) in a manner 
consistent with the Paris Agreement.
For more information about our approach to climate change,  
view our TCFD report. 
Looking ahead: Climate stewardship and thermal coal engagement
We made significant steps forward on climate change stewardship in 2021 and our efforts are 
accelerating throughout 2022. Two major milestones of our climate stewardship efforts have been 
the implementation of our Voting Principles and Guidelines focussed on climate change and our first 
transition engagements tackling thermal coal exposures in our portfolios in the second half of 2022.

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Fidelity International
Sustainable Investing Report 2022: ESG 2.0
Nature  
Our economic system and the benefits we derive from it are highly dependent on the Earth’s natural 
capital, from which we derive key ecosystem services. Natural capital is a complex dynamic system in 
which biodiversity, the diversity of living species, interacts with the non-living environment defined by 
hydrological, geological, chemical, climate-related and geographical parameters. 
Since 1970, there has been an estimated 68% 
decline in biodiversity. Further, it is estimated that 
approximately 50% of global GDP is moderately 
or highly dependent on nature according to the 
World Economic Forum. As such, the preservation of 
biodiversity and ultimately the reversal of this loss 
is critical to ensuring the long-term prosperity of the 
world’s global economy. 
Moreover, biodiversity loss and climate change are 
closely linked. Climate change is one of the major 
threats to biodiversity and is expected to become 
the dominant driver in coming decades, acutely so 
in tropical regions. On the other hand, preserving 
biodiversity and natural capital can play a key role 
in mitigating climate change.
Given the dependence on ecosystem services 
for the functioning of the global economy, we 
expect issuers to understand their dependencies 
and impacts on biodiversity. Issuers must conduct 
biodiversity impact assessments of their operations 
and supply chains and where relevant commit 
to achieve net zero deforestation within clear 
timeframes. This extends across the supply 
chain, from producers of key deforestation risk 
commodities, such as palm oil, beef, soy, timber 
and pulp, to food manufacturers, fast-moving 
consumer goods (FMCGs), as well as key enablers, 
such as financial institutions.
We expect issuers to minimise the negative 
externalities caused by their businesses including 
but not limited to water usage, waste management, 
product quality, chemical safety and deforestation.
We expect issuers to understand 
their dependencies and impacts 
on biodiversity. Issuers must 
conduct biodiversity impact 
assessments of their operations 
and supply chains and where 
relevant commit to achieve net 
zero deforestation within clear 
timeframes.

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Fidelity International
Sustainable Investing Report 2022: ESG 2.0
Natural capital featured as one of our key 
themes for 2021, and we have undertaken 
engagement on several nature-related topics 
throughout the year. 
One example has been our plastics thematic 
engagement, where we have engaged with 
several FMCGs on plastic packaging. The primary 
objective of this engagement is to encourage 
FMCG companies to embed the principles of the 
circular economy into their business models, with 
the ultimate goal of reducing the impact of plastic 
pollution on biodiversity. We also seek to identify 
and assess the risks and opportunities these 
companies are exposed to as a result of their  
use of plastics.
Other highlights during 2021 were our public 
support of the Business Call for a UN Treaty 
on Plastics at the United Nations Environment 
Assembly 5.2 and our signing of the Finance for 
Biodiversity Pledge. Of particular note was our 
commitment at COP26 to eliminate commodity-
driven deforestation from our investments by 
2025 on a best-efforts basis. As part of this 
commitment, we will also provide enhanced 
disclosure of exposures and mitigation activities 
for managing deforestation risk by 2023.
In our voting activities, we encountered relatively 
few nature-related shareholder proposals, 
however, we largely supported items we 
perceived to address material risks while 
remaining non-prescriptive.
At COP-26 we committed to eliminate commodity-driven deforestation from our investments  
by 2025, on a best-efforts basis as part of a broader investor coalition.  →
198 
Engagements related to nature 
including biodiversity, waste 
management and water usage. 
73%
Support for nature-related shareholder 
proposals, including those focussed on 
plastics, terrestrial biodiversity, and 
water management (8/11)*.
*Including abstentions
Source: Fidelity International (2022), ISS (2022).

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Fidelity International
Sustainable Investing Report 2022: ESG 2.0
Biodiversity
Details and Outcomes of Engagement
In 2020 we joined a collaborative engagement programme, 
led by ACTIAM, in partnership with Satelligence, a 
geodata-analytics company, to measure and reduce 
company-specific deforestation.
The group conducted engagements with multiple companies 
to address cases of deforestation, detected through the use 
of satellite data, calling for companies to implement policies 
and improve governance to eliminate deforestation from 
their activities. 
Following the first phase of engagement in late 2020,  we 
acted as co-leads on a series of engagements focused on 
companies that source palm oil from Indonesia and Malaysia. 
Adopting a similar structure to the first phase, our 
engagements comprised two target groups:
■	 Group A: Companies which do not disclose their supplier 
lists for soft commodities. Given the lack of transparency, 
it is not possible to source satellite data for these 
companies to assess deforestation impacts. Often, the 
base level of understanding of deforestation impacts 
and risks is limited. Hence for this group of companies, 
engagement is initially focused on education and 
encouraging companies to increase transparency. 
■	 Group B: Companies that do disclose their supplier lists 
for soft commodities. Satellite imagery is used to capture 
incidents and rates of deforestation, using data from 
Satelligence. This data informs our conversations with the 
companies, addressing these impacts and encouraging 
companies to implement policies and controls to 
eliminate deforestation impacts from their operations. 
We were able to engage in constructive dialogue with 
companies. In Europe, major FMCGs are well aware of the 
challenges associated with deforestation and have clear 
Case study
policies and controls in place to address them including 
monitoring and verification systems for their palm oil 
supply chains, as well as grievance systems for reporting 
deforestation incidents. There is increasing awareness of the 
need for greater transparency. Many companies which do not 
yet disclose their supplier lists have plans in place to do so. 
Best practice is where companies hold suppliers accountable 
for incidents of deforestation and suspend relationships with 
suppliers who breach deforestation policies. Roundtable on 
Sustainable Palm Oil (RSPO) certification remains the industry 
standard, and some companies are setting associated 
targets to reach full certification. 
However, challenges remain. A lot of palm oil is grown on 
small holder farms, which poses a challenge to traceability. 
In Indonesia and Malaysia, approximately 40% of palm oil 
production comes from farms smaller than 50 hectares. The 
fragmented nature of the supply chain means that there are 
many players contributing to the issue. However, given the 
spotlight has been on palm oil for some years, deforestation 
risks associated with palm oil are more high profile than 
other soft commodities, such as beef, timber and soy. 
The group will continue its ongoing engagements, while 
also engaging with more companies, across a broader 
range of sectors, across the supply chain. Fidelity is leading 
engagements with three companies based in China, where 
issues of deforestation are not widely addressed.  
While progress has been made to address deforestation 
risks associated with palm oil, a lot remains to be done. 
At COP26, we joined a group of 30 financial institutions 
committing to implement best efforts to eliminate 
deforestation triggered by agricultural commodities from 
investment and lending portfolios by 2025. Engagement will 
play a critical role in achieving our goals, and collective 
action by investors can be an effective means to steer 
companies towards better practices. 
Involvement
Fidelity has partnered with ACTIAM, a Dutch asset manager, on two collaborative engagement initiatives addressing 
biodiversity impacts. This engagement addresses deforestation across the supply chain, based on satellite data.

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Sustainable Investing Report 2022: ESG 2.0
Big brands need to clean up on plastics
Growing exponentially since the 1980s, the 
volume of plastic we discard has become one of 
the world’s biggest problems. Cheap, light, and 
often less carbon intensive than glass, plastic has 
huge advantages for manufacturers, but less than 
9 per cent of the 400 million tonnes produced 
annually is ever recycled. Around one rubbish 
truck of plastic leaks into the ocean every minute, 
with disastrous consequences for marine life.
As a part of our broader push on biodiversity and 
building a circular economy, therefore, Fidelity 
engaged late in 2021 with nine major consumer 
goods producers who themselves use thousands 
of tonnes of plastic a day, on their plans to reduce 
pollution. The companies were chosen based on 
the amount of their packaging that leaks into the 
environment and most are holdings within Fidelity’s 
funds. The results show many of the companies will 
struggle to meet at least some of the targets they 
have set themselves. However, they also suggest 
that firms from Nestle to Unilever to Coca-Cola are 
making progress. Promoting the adoption of targets 
and holding companies to them will be central to 
Fidelity’s efforts to drive sustainable outcomes in the 
years ahead.
Most of the companies we met with are 
signatories to the Ellen MacArthur Foundation’s 
Global Commitment on plastic reduction, whose 
targets and methodology for measuring progress 
towards a circular economy we also recommend 
using. The following are selected highlights from 
the engagement meetings with the companies.
Coca-Cola  
The consumer world’s biggest plastic user, 
Coca-Cola, long ago outsourced its bottling to 
a web of regional providers. Their performance 
on sustainability varies, but Coca-Cola has 
committed to making all plastic bottles recyclable, 
compostable or reusable by 2025 and most of its 
bottlers are already close to those targets.
However, while the plastic packaging used by 
Coca-Cola may be recyclable, only a fraction is 
ever actually reprocessed.  So new approaches 
are needed for the company to reduce the 
number of its bottles and cans that wind up as 
waste in the long term.
Unilever  
All of the corporates we engaged with target 
some level of reduction in virgin plastic use, but 
Unilever is the only large fast-moving consumer 
goods company to have set an overall plastic 
reduction target, i.e. both virgin, newly-produced 
plastic and recycled plastic.
This should be best practice for the industry. 
Chemical and mechanical recycling, which 
use different techniques to reuse material, are 
important, but in the longer run the overall volume 
of plastic being used must fall.
Alexander Laing  
Analyst & Portfolio Manager
Matthew Jennings   
Investment Director 
Sustainable Investing
Harriet Wildgoose  
Sustainable Investing Analyst

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Sustainable Investing Report 2022: ESG 2.0
Unilever’s target for 2025 is a 100,000 tonne-
reduction in the 700,000 tonnes it used in 2020, 
including a 50 per cent reduction in virgin plastic. 
While the numbers are not directly comparable, 
other companies we engage with are only 
targeting reductions in virgin plastic in the range 
of 5-33 per cent. 
Colgate/Mondelez/Proctor & Gamble 
Colgate just last year launched the first recyclable 
toothpaste tube, eliminating the aluminium 
foil which had historically made tubes difficult 
to reprocess. Importantly, it has shared the 
innovation with competitors - a move we applaud 
and encourage others to follow.
On the other hand, Oreo-cookie maker Mondelez 
trails its peers largely because it uses flexible, 
thin packaging that is not currently recyclable in 
the way a Coca-Cola bottle or an ice-cream tub 
is. This is a long road: currently, only five of the 17 
types of plastic used in packaging are recyclable 
at scale. Progress depends on technological 
innovation and possibly broader changes to how 
or where products are sold and used.
The world’s biggest FMCG group, Procter & 
Gamble, showed evidence of a thoughtful 
approach, developing promising technological 
solutions such as chemical recycling and digital 
watermarking of packaging and partnering with 
materials firm Eastman on its “molecular” recycling.
Many of those we engaged with listed supply of 
quality rPET - the plastic used, for example, in soft 
drink bottles - as a challenge. Food-grade PCR 
(post-consumer recycled plastic) is being bought 
by the fashion industry, which doesn’t need food-
grade, driving up the price for these plastics. 
Fashion items are generally not recycled after 
use, so potentially recyclable plastic is in effect 
removed from the circular system. Our team of 
analysts is now raising this in engagements with 
fashion companies.  
Chart 7: Per cent of packaging that is recyclable, reusable, compostable
Source: Ellen Macarthur Foundation, company reports, Fidelity International, May 2022. 
% of packaging recyclable, reusable, compostable, EMF data
Companies not using EMF methodology
0%
50%
100%
Coca-Cola
CCH
CCEP
Henkel
Pepsi Co
P&G
Danone
Reckitt Benckiser
Nestle
Colgate Palmolive
Unilever
L'Oreal
Mondelez

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Fidelity International
Sustainable Investing Report 2022: ESG 2.0
Deforestation exposures in our portfolios
Since 2018, Fidelity has run a thematic 
engagement on palm oil, advocating for 
an end to tropical deforestation. We have 
engaged across the value chain, with a 
particular focus on palm oil growers in 
Southeast Asia. We are also widening the 
scope of our palm oil thematic engagement to 
cover all key forest risk commodities: palm oil, 
beef, soy, and paper/timber.
Our deforestation engagement will focus on 
companies and financial institutions where we 
have material holdings and which we have 
identified as being highly exposed to tropical 
deforestation risk. To eliminate agricultural 
commodity-driven deforestation risks across 
our investment portfolios by 2025 we will focus 
on encouraging boards to act on the issue as 
a matter of urgency, through timebound zero 
deforestation commitments and improved supply 
chain management. We will also continue to 
participate in several collaborative initiatives 
and investor working groups, helping to develop 
standards and address deforestation at the 
system level. Fidelity will be leading at least 
three of the phase II engagements as part of 
ACTIAM’s satellite-based engagement towards 
zero deforestation. 
Championing the circular economy: plastic 
packaging & sustainable raw materials
In January 2022 we completed the first round of 
our thematic engagement on plastic packaging 
pollution. In order to focus our engagement 
with FMCG companies going forward, we met 
with the Ellen MacArthur Foundation in February 
to discuss how our ongoing engagement can 
encourage companies to embed the principles 
of the circular economy into their business 
models. As we continue our engagement 
efforts in 2022, we will be encouraging the 
harmonisation of reporting standards; we 
believe that the comparability of information 
is key for investors. There is still plenty that 
companies can do to reduce their total use 
of plastics and improving the transparency 
of disclosures is a big part of the challenge. 
Moving forward, we will be pushing for more 
disclosure around the level of investment in 
research and development and lobbying activity 
in plastic packaging.
The environmental impact of the fashion industry 
is significant, with the industry accounting for up 
to 10% of global GHG emissions. This year we 
have started engaging with several investee 
fashion brands to encourage increased disclosure 
and target setting surrounding raw materials 
sourcing and supply chain mapping. Generally, 
there is no consistent approach to raw material 
Looking ahead: Forests and fashion in focus
2021 was an important year in framing Fidelity’s approach towards natural capital stewardship. Moving 
into 2022 we hope to continue progress on our plastic packaging thematic engagement. We will also 
be focusing attention on the development, and implementation, of two new engagements tackling 
deforestation and fashion’s environmental sustainability.

Social

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Sustainable Investing Report 2022: ESG 2.0
Employees 
We believe that inclusive organisations that hire, foster, promote, and remunerate employees on 
the basis of merit and without regard for gender, age, race, ethnicity, religion, sexual orientation, 
economic background, disability or other factors make better use of their human capital. 
By effectively managing the needs of their 
stakeholders, companies experience enhanced 
organisational performance in the long run. 
Whether focussed on diversity, equity, and inclusion 
(DEI) or human rights and modern slavery, our 
engagements aim to promote best practice in 
human capital management with this tenet in mind. 
As mentioned earlier in this report, our revised 
Voting Principles and Guidelines outlines 
expectations for firms in developed markets to 
ensure female representation of at least 30% on 
the board, and 15% in other markets. We held 
numerous conducive discussions with boards 
following the launch of the policy with some 
notable positive outcomes already witnessed. 
While board diversity served as the impetus 
for engagement in several circumstances, our 
focus during these engagements often extended 
beyond the boardroom. We encourage investee 
companies to establish comprehensive and 
effective non-discrimination policies and actively 
ensure that these policies are upheld. They are 
also encouraged to regularly review their hiring 
and promotion practices to ensure against bias, 
and to set ambitious diversity targets appropriate 
to the business. We expect companies to 
demonstrate alignment with our belief that diversity 
helps deliver long-term shareholder value. A later 
case study, covering our work as part of the 40:40 
Vision initiative, provides some insight into our 
engagement on this topic.
515
Topics covered during 
employee-related engagements, 
including diversity, employee 
management, supply chain 
management and 
operation safety.
54%
Votes against management on 
employee-related shareholder 
proposals, including those 
focussed on pay equity, civil rights 
audits, workplace sexual 
harassment and modern slavery 
(39/72)*. 
201
Votes against directors for failing 
to address a gender imbalance 
in their board membership, and 
meet board diversity targets of
30% in developed markets and 
15% globally*.
*Including abstentions
Source: Fidelity International (2022), ISS (2022).

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Sustainable Investing Report 2022: ESG 2.0
Another critical focus of our engagement in 
this area is human rights and modern slavery. 
Inadequate management of a company’s supply 
chain can expose it to reputational, operational 
and legal/regulatory risks as well as hidden and 
uncontrollable risks, such as human rights abuses 
and corruption. Fidelity plays a key role in several 
long-running initiatives that focus on human rights 
and modern slavery, an example of one such 
collaborative engagement with Investors Against 
Slavery and Trafficking, APAC (IAST) is detailed 
later in this section.
We expect issuers to practice fair treatment of  
workers, including contractors and sub-contractors, 
and we look for decent wages, collective bargaining 
policies, freedom of association and grievance 
mechanisms. These expectations also apply to 
issuers’ supply chains, to the extent that they should 
take responsibility, and be able to account for both 
the human and materials sourcing side of their 
supply chains. Issuers should have measures in 
place to ensure suppliers meet a code of conduct, 
applicable to tier 1 and 2 (at the minimum with a 
plan to apply it to beyond tier 2) suppliers, with 
robust policies and training in place to help find and 
mitigate against instances of modern slavery. 
We also encourage companies to examine the 
risks of modern slavery and the broader risks of 
labour exploitation, as this is a leading indicator of 
modern slavery, by running a risk-based mapping 
exercise of their supply chain that could help 
companies to achieve better visibility of the supply 
chain across sectors and geographies and identify 
the more at-risk suppliers to prioritise their focus.
Customers and communities
Fidelity also engages with a range of companies 
on other social issues that we broadly define 
as affecting either customers or communities. 
Examples range from responsible marketing or 
product/service quality (customer-related impacts) 
to broadened access for basic goods/services 
(community-related impacts). 
During 2021, a notable focus in this domain was 
access to medicine. In April 2021, Fidelity joined 
the Access to Medicine Foundation’s collaborative 
effort in accelerating an equitable Covid-19 
medical response. This focused on encouraging 
high-income companies to increase their 
financing of the Access to Covid-19 Tools (ACT) 
Accelerator, as well as working alongside 157 
investors and peers to devise innovative financing 
tools. By leveraging Fidelity’s existing healthcare 
stewardship activities with investee companies, 
we started to engage with large pharmaceutical 
and biotechnology companies to promote the ACT 
Accelerator and the need to enhance research 
and development, the manufacturing of the 
vaccine and other related solutions. During the 
third quarter, we met with four companies (Eisai, 
Otsuka, Novo Nordisk and Wuxi Apptec). 
297
Topics covered during customer and 
community-related engagements. 
56%
Votes against management on shareholder proposals 
related to customers and communities, including those 
focussed on political lobbying, public health and 
community impacts (53/95)*. 
*Including abstentions
Source: Fidelity International (2022), ISS (2022).

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Fidelity International
Sustainable Investing Report 2022: ESG 2.0
40:40 Vision initiative on gender diversity
Details and Outcomes of Engagement
At the very end of 2020, we initiated our first engagement in 
association with the initiative, with Domino’s Pizza Enterprises 
Limited, a franchise license owner of Domino’s Pizza 
operating in Australia, New Zealand, France, Belgium, the 
Netherlands and the Principality of Monaco. The meeting 
was initiated following the letter that was sent to the ASX200 
companies. The company has not historically had company-
wide targets or gender quotas, but it does have board level 
targets. When we spoke to the company, the leadership 
team was all male, although the company did have one 
female joining in February 2021. 
Following the receipt of the letter, the company informed 
us that it has committed to setting the 40:40:20 targets. The 
company is also looking to address gender diversity at the 
company level, ensuring they there is 50:50 representation 
during the recruitment process. It is also looking at peer 
practices to understand and establish best practice. The 
company faces some structural headwinds; much of the 
senior management team come from franchisees, where 
most of the employees are drivers, who are predominantly 
male. To address this, the company has set up internal 
groups to review the current talent pool of women in the 
franchises and has recently elected the first female to their 
Franchise Advisory Council.
In 2021, following our engagement, the company announced 
its target to achieve at least 40% female representation on 
the board of directors, for global leadership and for country/
regional leadership, publicly pledging its support for the 
40:40 Vision. The company is also a member of the 30% Club, 
Case study
committing to achieve at least 30% representation of women 
on all boards and C-suites, a threshold the company has 
already reached. The company has shown strong progress 
in committing to improve gender diversity at all levels of the 
firm. We will continue to monitor progress towards the 40:40 
Vision target and diversity at the company wide level. 
The second company that we have engaged with is 
PolyNovo Ltd, following the engagement letter that we sent 
to the company under the 40:40 Vision scheme. 
The company stated that they historically have not had 
targets or quotas for gender diversity at any level within 
the company, but they do track this data internally on 
top of other diversity factors such as race and religion. 
Their company’s board consists of approx. 30% females, 
while managerial positions (CEO-1) have 55% female 
representation. The company appreciates the value of 
gender diversity at the board level, and while their primary 
focus is on hiring board members with the relevant skill 
sets, gender diversity is an important consideration when 
reviewing board composition.
The company hires firstly based on competence and 
performance and does not bias any single role towards a 
particular gender. While the company is supportive of the 
40:40 Vision and has already aligned with the objectives of 
the initiative, it was not in a position to set short-term targets 
at the time of our engagement. We will continue our dialogue 
with the company and encourage improvements. 
Involvement
In 2020, we joined 40:40 Vision, an investor-led initiative in Australia with an aim of achieving gender balance in executive 
leadership across all ASX200 companies by 2030. The initiative is actively encouraging companies to set and publicly report 
on their progress against composition targets (40% women, 40% men and 20% any gender) for executive leadership (CEO -1). 
An investor letter was sent to the ASX200 at the end of 2020 explaining the 40:40 Vision goals and requesting companies to 
sign up to the initiative and publish their composition targets. We have led engagements with several companies associated 
with the initiative, and have also discussed the initiative with several companies in our pre-AGM engagements, including 
Charter Hall, Blackmores, Lendlease, Evolution Mining, and Channel 9.

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Fidelity International
Sustainable Investing Report 2022: ESG 2.0
We also engaged with CSR Limited, a manufacturer and 
supplier of building materials. The company confirmed that 
it is moving to 50% female representation at board level. 
In relation to the executive leadership team, it is moving 
towards 37% female representation on the back of a pending 
director replacement. However, gender diversity more 
broadly across the workforce remains a challenge. 
At CEO-2 level, females represent just 27% of the workforce, 
while across the entire company just 21% of employees are 
female. The company has set in place a target to increase 
the CEO-2 level to be in line with the executive leadership. 
The company recognised the positive feedback loop 
associated with increasing gender diversity: the more 
women that they recruit into senior roles, the more female 
talent the company will attract. However, there are 
structural challenges that CSR faces. The manufacturing 
industry on average has just 27.5% female representation. 
The company is aware of this challenge and is 
concentrating on creating a female talent pipeline for 
the future, with diversity being a strategic focus area for 
the company in 2021. It was encouraging to see that the 
company has a number of initiatives in place to promote 
improved female representation, including its recruitment 
practices and career development programmes. The 
company was receptive to the idea of signing up to the 
40:40 Vision and we plan to follow up our engagement 
with the company soon to monitor progress.
From our engagements and pre-AGM discussions, 
companies have been generally supportive of the idea 
behind the 40:40 Vision. At the board and executive level, 
many companies have already implemented targets and 
have made progress to encourage increased gender 
diversity. At the company level, the dynamic is more 
nuanced. Companies may face structural headwinds, 
recruiting from a pool of talent which lacks gender diversity. 
In these instances, it is important that companies implement 
controls to prevent bias in their recruiting process and 
develop schemes to support the development of more 
diverse talent at all levels of the organisation. 
We see 40:40 Vision as part of our overall diversity and 
human capital engagement and will continue to embed 
it into conversations with companies. Beyond that we will 
follow up with companies where Fidelity is a company lead 
and encourage them to set targets and join the initiative. 
Case study
40:40 Vision initiative (continued)

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Fidelity International
Sustainable Investing Report 2022: ESG 2.0
China Gender Diversity Report
China’s steps towards greater gender diversity 
have lagged its remarkable economic growth 
of recent decades, and women today remain 
on the periphery of company boards and  
top managements.  
However, there are signs of progress, as 
reflected in recently improving gender ratios. A 
new generation of female executives is rising 
slowly through the corporate ranks, while gender 
equality in education is improving and public 
acceptance of female leadership is growing.  
At Fidelity, we believe a diverse leadership team 
can better steer a company on a sustainable path 
and we seek to promote gender diversity both 
internally and at our investee companies. To better 
guide our work with Chinese investees, we have 
taken a close look at the policies and measures 
of China’s top 50 companies and presented key 
findings in our first China gender diversity report.  
We used the number of female directors as a key 
gauge of corporate gender diversity. As in most 
parts of Asia, public awareness in China over 
the importance of gender diversity has generally 
lagged the West - although China in many 
respects still fares better than neighbours like 
Japan, South Korea and Indonesia. Our inaugural 
report on gender diversity in corporate China 
finds a slow but steady rise in gender inclusivity 
at listed Chinese firms, with the improvements 
more notable as younger generations rise 
through the ranks.
Our analysis of A50 stocks found that women 
accounted for 14% of directors, while at the 
supervisory board level, female ratios average 29% 
for the 50 firms. Under China’s Companies Law, at 
least one third of supervisory board seats must be 
held by ordinary workers, whose more balanced 
gender divide often helps boost the supervisory 
board’s female representation.
Source: Nankai University, Fidelity International, December 2021. 
Chart 8: Female directors and chairs rise in 
China
Number of firms
Percentage
2012
2014
2016
2018
2020
0
800
1600
2400
3200
0%
4%
8%
12%
16%
Average % of female directors (RHS)
Listed firms with female directors (LHS)
Listed firms with female chairs (LHS)
Source: Fidelity International, December 2021. 
Chart 9: Average female ratios for China’s 
A50 firms
29%
14%
12%
Supervisory board
Board
Top management

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Fidelity International
Sustainable Investing Report 2022: ESG 2.0
We also found that companies cross-listed in 
mainland China and Hong Kong are usually less 
diverse than purely onshore firms. One possible 
explanation for the gap is that dual-listed Chinese 
firms are often state-owned enterprises (SOEs). And 
those SOEs, which account for about one third of 
China’s economy, have lagged significantly behind 
the country’s private-and foreign-invested firms 
when it comes to gender diversity. 
Moreover, our findings point to the top Chinese 
companies taking a compliance-driven approach 
to gender diversity. Hong Kong-listed firms are 
required to say in their annual reports whether 
they have a board diversity policy. Nineteen 
members of the A50 index have done so, albeit 
17 of them are dual-listed in Hong Kong. The 
implication is that few companies seem to have 
taken a step beyond the minimum regulatory 
disclosure requirements. 
Based on our engagement with some of the 
leading companies on this issue in China and 
globally, we think there are measures Chinese 
companies can consider that would advance 
corporate gender diversity. First is to develop 
systematic support measures for female workers. 
This includes setting specific gender targets 
for recruiting C-suite members and appointing 
board directors and committing themselves to 
non-discrimination practices for promotion and 
pay. Second, we believe setting up a nomination 
committee for the board of directors, ideally 
chaired by a woman, could also lead to more 
organised efforts to achieve a more diversified 
board. It is equally important to offer adequate 
maternity leave and support for childcare.  
Engaging companies in a dialogue and using 
our shareholder votes have proved to be the 
most effective means by which we can articulate 
our views on diversity and push for change. For 
example, we engaged with a large food and 
beverage company in China in 2021 which had 
no female directors on its board despite most 
of its customers being female. We emphasised 
the importance of having female representation 
on its board especially given its customer base. 
Disappointingly, at the annual shareholder 
meeting subsequent to our engagement, the 
company failed to appoint any female directors. 
This led us to vote against the re-election of 
the board chair and several other directors we 
believe should be held accountable for the poor 
board composition.  
Since the annual shareholder meeting, however, 
the firm appointed its first ever female director 
to the board in December 2021. While we were 
preparing this report, the Chinese government 
announced its new 10-year national plan on the 
development of women and children, setting 
out some 200 objectives and measures for 
advancing women’s rights in areas such as 
employment, healthcare, and education. Against 
this favourable policy backdrop, we are confident 
that corporate gender diversity will keep 
improving in China, as we remain committed to 
engaging on the issue.
Source: Fidelity International, December 2021. 
Chart 10: Pure A-share A50 firms outperform 
dual-listed ones on gender diversity 
Female representation
Dual-listed firms
Pure A-share firms
Board
Supervisory board
Top management
0%
10%
20%
30%
40%

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Fidelity International
Sustainable Investing Report 2022: ESG 2.0
Details and Outcomes of Engagement
We engaged with a consumer discretionary company in 
China to assess progress on increased disclosure on supplier 
audits and human rights assessment following an earlier 
letter sent to the board on the topic.  
The company had recently appointed a sustainability 
lead, initiating a review of their sustainability policies and 
procedures, including their supply chain management and 
human rights monitoring policies. 
While these initiatives were encouraging, the company must 
focus on effectively executing these plans and reporting on 
progress, which will be the focus of future engagements. 
In 2021, we also engaged with a palm oil company as 
part of a collaborative initiative. Overall, the company was 
very open with regards to discussing their current progress 
towards addressing human rights issues in the supply chain 
and their own operations.  The company is aware of key 
issues and has undertaken several projects to improve 
transparency and mitigate risk. However, gaps remain, 
and the nature of the industry makes 100% transparency 
challenging. Potential areas of improvement relate to the 
behaviour of smallholders, their buyers and suppliers; a 
more structured risk assessment; and enhanced disclosure 
regarding instances of breaches and remedial action taken, 
which will be the focus of future engagements.
Involvement
In 2020 we became a founding member of IAST working with companies in the Asia Pacific region on how they can more 
effectively take action on human rights risks within their operations, specifically focusing on modern slavery and labour 
exploitation in the supply chain.  
Case study
Q4 
2020
Q3 
2020
Q2 
2021
■ Joined Find it, Fix it, 
   Prevent it*
■ Became a founding 
   member of IAST 
■ Commenced 
   engagement as part 
   of Find it, Fix it, 
   Prevent it, focusing on 
   the UK hospitality sector
■ Commenced modern 
   slavery engagements 
   as part of IAST
Developments in engagement on modern slavery 
*An initiative which aims to bring together the investment management industry to push for meaningful, effective corporate action to end modern slavery.
Investors Against Slavery and Trafficking

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Fidelity International
Sustainable Investing Report 2022: ESG 2.0
Building further on a range of initiatives 
Through our involvement in the 40:40 Vision initiative 
we will look to continue to encourage diversity at 
the board level across ASX300 companies with a 
particular focus on developing opportunities for 
diverse candidates across organisations.
As part of Find it, Fix it, Prevent it, in 2022 our 
engagements will extend from the hospitality 
industry to the construction industry with a view to 
engaging with construction companies to develop 
and implement better processes for finding, fixing 
and preventing modern slavery. 
With IAST we will continue our engagement 
efforts working with companies in the APAC 
region on how they can address human rights 
risks within their operations.
 
 
Looking ahead: Diversity and human rights
In 2021 we conducted extensive engagements with Japanese companies in relation to achieving at 
least 15% female board representation. In 2022 we will continue to engage with those firms that are still 
failing to meet the 15% board gender diversity target and encourage firms overall to build a pipeline of 
diverse talent.

Governance

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Fidelity International
Sustainable Investing Report 2022: ESG 2.0
Oversight
We expect companies to have a robust corporate governance framework that can define long-
term, innovative strategies and implement them for the benefit of all stakeholders. Vision and 
effective oversight are key to building a company with sustainable long-term success. 
Effective boards play a critical role in the strategic 
direction of an issuer, and overseeing risk 
management processes. We expect the majority 
of board members to be independent with the 
suitable skills to fulfil supervisory duties as well 
as provide guidance and constructive challenges 
to executive management. We expect boards 
to reflect or demonstrate a plan for improving 
gender, ethnic and cognitive diversity. 
Issuers should promote an ethical culture and 
code of conduct that permeates throughout the 
organisation. Corrupt business practices represent 
a significant investment risk and create negative 
externalities for the broader economy and society. 
The board should ensure that the issuer fosters a 
culture of acting lawfully, ethically and responsibly. 
To this end, the board should ensure that the 
issuer has adequate whistle blower, anti-bribery 
and corruption policies in place and is actively 
monitoring the application of those policies. 
In 2021, we set out expectations for the number of 
boards directors should serve on and encouraged 
companies to be mindful about director 
refreshment. We also asked companies to consider 
periodic refreshment of their auditor as a matter 
of best practice and, particularly in the US where 
audit tenures can be decades long, we have been 
engaging and starting to vote against companies 
that have not made the requisite changes. 
915 
Oversight topics raised during 
engagements.
569
Votes against directors owing to 
independence concerns*. 
*Including abstentions
Source: Fidelity International, 2022. ISS, 2022. 
For more information on our approach to  
oversight and investor rights, visit our 
latest Voting Principles and Guidelines.  →

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Fidelity International
Sustainable Investing Report 2022: ESG 2.0
Incentives 
At Fidelity, we believe that how management teams are paid plays a powerful role in creating value 
for our clients and ensuring equitable outcomes for a range of stakeholders. We promote clear, 
simple and well-designed remuneration structures that incentivise senior managers to deliver on 
company strategy while aligning with the interests of shareholders and other key stakeholders. 
We engage extensively with board members 
and company management on executive pay to 
drive best practice and deliver positive outcomes 
for our clients. The topic was the centre of over 
488 engagements with companies in 2021, often 
occurring in the lead-up to an AGM or during 
remuneration consultations with board members. 
To guide our engagement, in 2021 we published 
our Voting Principles and Guidelines, outlining 
our expectations and minimum requirements for 
executive pay in a transparent manner. 
The fundamental principles we seek to promote 
during engagement on management incentivisation 
are long-termism, transparency, and outcomes that 
appropriately reflect stakeholders’ experiences. 
A number of our policies aim to explicitly 
address these principles, for instance minimum 
requirements around the retention period of 
equity awards or aligned executive pay during the 
pandemic at recipients of government support. 
Where appropriate, we consider market and 
industry context when evaluating remuneration 
arrangements, across both our sustainability ratings 
and stewardship activities. And where appropriate, 
we escalate our concerns by voting against directors 
at companies unresponsive to our requests. 
Increasingly, we view management incentivisation 
as a critical influence on progress towards 
sustainable outcomes. When effectively structured, 
remuneration may help to internalise the negative 
externalities arising from corporate activities: 
ranging from decarbonisation agendas to DEI 
performance.  To this end, we expect remuneration 
policies to be consistent with effective risk 
management, including the management of 
sustainability risks. 
25% 
Votes against management on 
remuneration-related proposals 
(1,155/4,590)*. 
173
Number of times we escalated 
our remuneration concerns and 
voted against a director. 
488
Engagements focussed 
on incentives.
*Including abstentions 
Source: Fidelity International, 2022. ISS, 2022. 
For more information on our approach to  
oversight and investor rights, visit our 
latest Voting Principles and Guidelines.  →

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Fidelity International
Sustainable Investing Report 2022: ESG 2.0
Covid-19 and executive remuneration
Background
Subsequent to our letter writing campaign in 2020 where we 
sent letters to a number of our larger holdings (in the UK, 
Australia and Continental Europe) outlining our expectations 
on executive pay decisions in the wake of Covid-19, we 
opened dialogues with a number of investee companies to 
explain our position, encourage best practice, and discuss 
pay decisions the board had reached.
Outcome 
For those companies where we concluded that remuneration 
outcomes did not appropriately align with stakeholders’ 
experience during the pandemic, we sought to escalate 
our concern through our voting. During the period from Q4 
2020 through Q3 2021, we voted against 109 companies 
globally based on concerns around remuneration practices 
related to the Covid-19 pandemic. The majority of these 
cases were companies that received taxpayer support under 
government furlough or wage subsidy schemes and then 
went on to pay bonuses to senior management. 
We believe that our engagement contributed to corporate 
behaviour in some markets. In the UK, where the broader 
investment community has been closely engaged on this 
issue, many companies that experienced only temporary 
disruption toward the beginning of the pandemic paid 
back their furlough support funds. Also, we observed a 
number of Australian companies paying back JobKeeper 
(wage subsidy) support prior to the 2021 AGM season in 
Q4. We had encouraged investee companies to do this 
in engagements prior to and during the 2020 Australian 
AGM season, and the issue received broad attention after 
several companies which had paid substantial executive 
bonuses but had refused to pay back subsidies were publicly 
‘named and shamed’ by members of parliament and other 
stakeholders. In other markets (e.g. continental Europe), the 
issue received less public attention - in some cases because 
taxpayer supported ‘short time work’ schemes and similar 
arrangements are longstanding in certain countries and 
industries - and consequently our engagement appeared to 
have less impact on corporate behaviour.
	
Case study
We opened dialogues with a 
number of investee companies 
to explain our position, 
encourage best practice, and 
discuss pay decisions the board 
had reached.

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Fidelity International
Sustainable Investing Report 2022: ESG 2.0
Samsung Electronics Co. Ltd.   
We are a long-time shareholder of the company and 
engage regularly through various means. Following the 
publication of the company’s three-year shareholder returns 
policy and a meeting in February 2021 to discuss ESG issues 
with the company, we wrote a letter to the chair in April to 
express concerns about executive remuneration and capital 
allocation practices and to advocate for change. 
Historically, the influence of the controlling shareholder 
family has led to weaker corporate governance not aligned 
with best practice, but steps have been taken in recent 
years to address this. In light of the 2020 announcement 
that management control would not be passed down to the 
controlling family’s heirs, we told the chair that we believed 
the time was right for senior executives to begin regularly 
receiving equity-settled remuneration to build up ownership 
stakes and align their personal interests with shareholders. 
We suggested setting a meaningful portion of long-term 
incentives in stock, preferably with a minimum holding 
period of three years. We also expressed our belief that the 
board’s capital return policy did not appropriately reflect the 
company’s strong cash position and projected future cash 
flows, and that capital returns to shareholders should be 
increased in the absence of compelling alternatives. 
In reply, the chair wrote that while the company recognised 
the benefits of stock-based remuneration and noted that a 
majority of the executive team are shareholders, it has opted 
for cash-settled incentive plans after having encountered 
problems with stock option plans previously. He noted that 
the current incentive scheme includes targets relating to 
stock performance and other financial metrics (ROE and 
EBIT margin) and said that the board was willing to continue 
looking for possible solutions. Regarding capital allocation, 
he explained that the excess cash on the balance sheet was 
there to allow management to execute capital expenditures 
in the challenging Covid-19 environment, and that returning 
cash from overseas to Korea was difficult due to tax 
considerations. We were told that the company planned to 
increase research and development, capital expenditure, 
and mergers and acquisitions expenditure going forward to 
maintain leadership in key areas. 
Although the response indicated that the board will not 
be adopting our suggestions at this time, we appreciated 
the board’s responsiveness and recognised that it has 
been making substantial improvements to the company’s 
governance in recent years, for instance by splitting the 
CEO and chair roles, appointing a new external auditor, 
and forming a new independent committee to oversee 
compliance issues. We plan to continue engaging  
going forward. 
Case study

Glossary
Double materiality: The requirement (as 
set out by the European Commission Non-
Financial Reporting Directive) for companies 
to report both on how sustainability issues 
affect their performance, position and 
development (the ‘outside-in’ perspective), 
and on their impact on people and the 
environment (the ‘inside-out’ perspective)
Engagement: the active ongoing process of 
constructive dialogue with an issuer during 
which changes may be sought in relation 
to that issuer. This can involve frequent and 
lengthy dialogue  with representatives of 
the company.  For more general information 
regarding engagement please refer to page 
54 of the UK Stewardship Code
ESG: means environmental, social and 
governance factors considered by companies, 
investors, public sector and other organisations 
in a wide range of decision-making processes 
and situations including, but not limited to, 
strategy, purpose financing, company reporting 
and supply chain management
ESG integration: the inclusion of ESG issues in 
investment research and analysis
Impact: positive and negative, primary  
and secondary long-term effects produced 
by an intervention, directly or indirectly, 
intended or unintended. (Source: Impact 
Management Project)
Negative externalities: a broad term which 
refers to negative effects or consequences 
of an act beyond a particular situation and 
includes, but is not limited to, the cost of an 
economic activity to an unrelated third party
Outcomes: the likely or achieved short-term and 
medium-term effects of an intervention’s outputs 
(Source: Impact Management Project)
Paris Agreement: an international treaty 
that came into force in November 2016. 
The agreement is to limit the global rise in 
temperature from pre-industrial levels to below 
2°C this century and ideally below 1.5°C
Stewardship (or active ownership): a broad 
term which refers to the use of influence by an 
active institutional investor seeking to maximise 
and preserve value including, but not limited to, 
overall long-term value for the benefit and in the 
best interests of clients and beneficiaries
UNFCCC: means United Nations Framework 
Convention on Climate Change

Contributors
Sustainable Investing: 
Charlotte Apps, Sustainable Investing Associate
Christine Brueschke, Sustainable Investing Analyst
Katie Constance, Director, Sustainable Investing Client 
Solutions
Max Palmer, Sustainable Investing Graduate
Matthew Roberts, Stewardship Analyst
Patrick Shortt, Sustainable Investing Intern
Ellie Tang, Director, Sustainable Investing
Flora Wang,  Director, Sustainable Investing & Portfolio 
Manager
Editorial:
Sophie Brodie, Europe Editor
Nina Flitman, Senior Writer
Patrick Graham, Senior Writer
Yi Hu, Investment Writer
Benjamin Moshinsky, Editor at Large
Useful links:
Climate Investing Policy
Engagement Policy
Exclusions Policy
Sustainable Investing Policy
TCFD Report
Voting Principles and Guidelines

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