Fidelity International warned companies it invests in that if they don't take sufficient action to combat climate change the asset manager will vote against management at shareholder meetings beginning next year.
The $787.1 billion investment firm announced new policies on climate change and gender diversity Monday that include requirements for portfolio companies to manage their environmental impact, reduce their greenhouse-gas emissions and provide specific disclosures about their emissions. To limit global warming to 1.5 degrees Celsius above pre-industrial levels, every area of the global economy "will need to go through a radical transformation" and companies that fall short of Fidelity's minimum expectations will be penalized by votes against their executives, according to a statement.
"Our message to investee companies is clear: The climate crisis must not and cannot be ignored," said Jenn-Hui Tan, global head of stewardship and sustainable investing at Fidelity International, in a statement. "It impacts the very nature of major industries in which we invest, and as such must be high on the agenda of all companies."
Fidelity International's warning comes as a growing cohort of asset managers seek to ratchet up pressure on companies to do more to address the climate crisis. BlackRock said it rejected almost five times more board directors at companies, including Berkshire Hathaway and Exxon Mobil, during the recent proxy season, compared with the previous year, because they failed to act on climate issues. Legal & General Investment Management said last month it is divesting holdings in four companies, including U.S insurer American International Group, after deeming they're making insufficient progress on addressing climate risks.
Fidelity was among the founding members of the Net Zero Asset Managers initiative, a group of fund managers that oversee a combined $43 trillion of assets that say they will support efforts to limit global warming by running carbon-neutral investment portfolios by 2050 or sooner.
Even as money managers make greater commitments to tackle climate change, the asset management industry, and several of its leading players, have faced frequent criticism for maintaining large holdings of fossil-fuel companies and not doing enough to force them to change.
Fidelity also said Monday it plans to press for greater gender diversity on boards. The money manager said it will actively engage with portfolio companies and consider voting against management in most developed markets that don't have at least 30% female representation on their boards. In markets where standards on diversity are still developing, Fidelity said it will have an initial threshold of 15%.