Terence Tsai, Fidelity Analyst and Portfolio Manager
Covid-19 lockdowns contributed to higher e-commerce volumes globally, and this played out on a grand scale in China. The country’s leading delivery firm, ZTO Express, saw shipments surge 40% last year, similar to growth seen in markets like the UK and the US. Yet the volumes were astonishing: ZTO delivered around 47 million parcels a day - more than volumes of FedEx, DHL and UPS combined.
Manufacturing and moving all those boxes, envelopes and packages adds up to a staggering amount of fuel emissions, and paper and plastic consumption, an obvious area of concern to investors focused on sustainability. But the sector is also grappling with a price war driven by fierce competition, which has been pressuring many Chinese delivery companies to cut corners.
An express dialogue
Against this backdrop, Fidelity’s investment team has been engaging in a running dialogue with ZTO’s management over the past two years that has contributed to the company’s embrace of more comprehensive standards of disclosure around the environmental, social and governance (ESG) impact of its rapidly expanding operations. One direct result of this engagement is that the company has become China’s first express delivery firm to publish regular standalone sustainability reports, and to make the pioneering move of linking executive compensation to sustainable performance. Amplifying the impact, others in the industry have taken notice of ZTO’s sustainability push and are starting to follow suit.
Gain an insight
In this video, gain an insight into Fidelity’s engagement with ZTO and how we helped them chart a route to more sustainable growth in this young and fast-growing industry. You can also read the full account here.
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