Analysts working at investment giant Fidelity International, the $706bn asset manager, predict almost a quarter of all the companies they cover will be carbon neutral by 2030, with more European firms set to achieve this landmark goal ahead of their peers based in other regions.
The poll of 144 analysts found they expect 24% of all companies covered to have reached the landmark climate goal by the end of the decade, reflecting growing pressure from large shareholders for organisations to move to more sustainable business models to fend off climate change risk.
Fidelity’s analysts point to the headway made by European companies, estimating that 30% will be carbon neutral by 2030. Fidelity said this reflected “how embedded sustainability is in the region”.
Jenn-Hui Tan, global head of stewardship and sustainable investing at Fidelity International, said: “Climate change is one of the greatest threats to society, business and the long-term profitability of companies and markets. That’s why we expect the companies we invest in to be directionally aspirational in their efforts to address the potential impact of climate change on their business.
“We are encouraged to see that sustainability issues are climbing the agenda every year across industries and across geographies — a mind shift that has been accelerated by the pandemic.”
Tan said this year for the first time, more than half of Fidelity analysts (54%) reported that the majority of their companies now regularly discuss sustainability issues, up from 46% in 2020 and 13% in 2017.
“Our net zero forecasts are based on companies’ current plans, so we expect them to be revised higher in the coming years, as regulations tighten and robust environmental, social and governance practices become a baseline for attracting investor capital,” said Tan.
Climate risk has become a key focus for asset managers and other shareholders. Recently BlackRock, the world’s largest asset manager, outlined how it expects companies to transition to a net zero economy
The $8.7tn asset manager wrote to companies detailing the steps it expects companies, boards and management teams to take in order for businesses to achieve this goal — where global warming is limited to well below 2 degrees Celsius and consistent with a global aspiration of net zero greenhouse gas emissions by 2050.
A quarter of Fidelity’s analysts said there was increased awareness of ESG at Chinese companies they cover, up from around 15% over the past three years. Fidelity said this could be an early reflection of China’s own net zero target of 2060.
Flora Wang, Director, sustainable investing and assistant portfolio manager at Fidelity International, said: “China’s carbon emissions are expected to peak around 2030, which means the country has less than 30 years to cut emissions from their peak to achieve its 2060 target. By comparison, carbon emissions in Europe peaked in the early 90s and at a much lower intensity level.
“Though this is an ambitious target, based on the conversations we are having with companies on the ground, I am confident that corporates will be able to rise to the challenge.”
She added: “China has a lot to lose if climate change is not kept in check.”
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