At Fidelity, we believe that active ownership can help drive sustainable business practices at the companies we invest in. Voting at shareholder meetings is a key part of this and, as we look ahead to the AGM season in Europe, we see three key areas of focus emerging - cost of living, climate change, and DE&I.
A continued push for net-zero action
It is more important than ever that companies take action on climate change. As part of our broader climate and nature strategy, we have released our Deforestation Framework, which formalises our stance on this issue and outlines how we plan to use our vote to hold boards accountable. This framework is in line with our 2023 sustainable investing priority to support natural capital, enabling the transition to a circular and more sustainable economy.
Under our voting guidelines, we will vote against management that fail to meet minimum expectations on climate change governance, policies, and disclosures. In addition, following continued deforestation-related engagement with companies in 2023, we will vote against members of the board at companies in high-risk sectors that do not adequately meet our deforestation-related expectations, effective as of 2024. We will continue to use our votes to advocate for companies to adopt climate and nature strategies that support a societal transition to net zero, recognising that getting real on climate means getting real on nature too. We place focus on those companies with credible backing and implementation plans.
We are also working closely with companies to discover how the energy crisis may have impacted their net zero strategy to inform our voting and engagements. Furthermore, in certain sectors where excess profits are materialising due to energy price dislocation, we will look to encourage an appropriate share of that profit towards the build-out and maintenance of renewable infrastructure to help accelerate the transition.
Responding to the cost-of-living crisis
With many places experiencing general inflation of over 10%, and food inflation of over 40% on some key items, workers are finding their wallets squeezed. However, it is not only individuals that have been affected: price increases have affected many sectors and will impact individuals and companies differently.
We recognise that solutions are not always straightforward and that for many companies inflationary pressures are already acutely evident, often in both energy and labour costs. Across the globe, we are seeing that these pressures are having significant social impacts on employees and communities, and that should be managed in a responsible manner.
In this broader context, we will approach the AGM season with an expectation that remuneration committees will consider the broader workforce experience when setting executive pay, including avoiding base salary increases for executive directors that outpace the wider workforce. Deviation from this approach will likely warrant voting action.
Further advocating for diversity and inclusion
The final key area we are watching closely is DEI. While we have seen improvements in terms of gender and racial equity in senior positions and greater levels of transparency around pay, there are still areas where significant progress is needed.
We are strong advocates for gender and racial diversity. From a business perspective, we believe it can have a positive impact on long-term value creation and risk mitigation - this should increasingly encourage boards to seek candidates with different skills and backgrounds. Where we feel this is not being achieved, we will actively engage and consider voting against company management in most developed markets that do not have at least 30% female board representation.
