Have global equities reached a tipping point?

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February 17 2020
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Global companies are increasingly considering their impact on the planet, with 90 per cent of all businesses focusing on ESG, new industry research has shown.

Have global equities reached a tipping point

According to Fidelity International, climate change awareness and corporate reform can be seen through all areas and sectors, including areas where ESG interest had previously appeared to stall or be in decline.

The study found that while ESG has been increasingly important for European markets, it has now been opened up in areas including China, where 80 per cent of analysts report an increase in ESG emphasis.

Just over 90 per cent of Fidelity International’s analysts covering the US and Canada cited a growing emphasis on ESG at some or all of their companies, compared with 57 per cent in 2019.

Jenn-Hui Tan, global head of stewardship and sustainable investing at Fidelity International, believes it’s encouraging to see Chinese institutions becoming focused on ESG.

“We believe this is due to a combination of factors, including the Chinese authorities’ drive to improve governance, a rush among companies to invest in renewables before government subsidies are cut, and calls from investors for greater transparency around supply chains. More Chinese companies are also considering increasing dividends to shareholders and engaging with investors as a way of attracting further capital,” Mr Tan said.

In the United States, Mr Tan believes that despite the government rolling back regulations around the environment, investors are still looking for companies to have a social outlook.

Meanwhile, Europe and Japan are powering ahead. In Europe, every single one of our analysts observe that some or all of the firms they cover pay close attention to ESG issues, compared with 92 per cent last year.

Japan too is at 100 per cent, up from 79 per cent in 2019 as the government pushes companies to simplify shareholdings and appoint more independent directors.

While corporate governance is generally improving, with greater levels of investor engagement throughout the world, companies have made less progress on board diversity, Fidelity noted.

“Most analysts report that their companies’ boards have low to middling diversity, with almost no change on the previous year,” Fidelity’s report concluded.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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