Industry will see more effective and nuanced engagements as ESG grows up

In this video interview, Fidelity's Emilie Goodall discusses how the increased scrutiny on asset manager engagement is welcome

The increased scrutiny on asset manager engagement is a sign the ESG investment industry is “growing up” and firms should welcome these questions, said Fidelity’s head of stewardship for Europe in this video interview.

She explained how standards are moving and best practice is evolving, which is, for her an exciting time to be working in a stewardship role.

Goodall also talked about the positive impact of being a part of peer-learning groups, the “second-mover advantage” in the UK and effective governance.

Watch the full video interview above and read the transcript below.

NK: Hello and welcome to this special video interview. I’m Natalie Kenway. And here I’m joined by Emilie Goodall, head of stewardship for Europe at Fidelity. Thank you so much for taking the time to speak with me today. Let’s reflect on last year, 2023. It was an interesting time for the world of sustainable investment. There was lots of regulation coming through and there were some interesting conversations around appetite as well. What was your main takeaway from last year?

EG: I think 2023 was the year ESG investing really grew up, there were natural growing pains and it brings desired scrutiny to the industry. It’s been a challenging time. There have been significant headwinds across the business. But actually, if you look at net inflows for ESG funds globally, for Q3 in 2023 the latest data we’ve got, you’ve seen a positive net inflows both in equities and bonds.

There’s definitely continued client interest and continued client appetite for this area of work.

I think what we’re seeing with the regulatory changes and developments is somewhat of the second mover advantage starting in the UK with SDR, following on from the EU’s SFDR. And obviously there’s been a lot of work for everyone in the industry and a lot of detail to get through. But I think it’s just demonstrating the sheer variety with that growth in assets under management of different strategies and different styles. And there’s getting much greater clarity about just the sheer variety that you can get in sustainable investing.

NK: Yeah, that sounds like we’re being set up quite well to head into this year. Before we talk about this year, the last year ended with COP28 in Dubai and the president at the time was talking about history being made. Yet there was some criticism that, again, it didn’t go far enough. We’ve had some time to digest all of those points. What was your takeaway from that? What was your highlight?

EG: Well, it’s always a key moment, a historical moment, at these kind of global symposiums where you’re bringing together public, private and civil society together for a key marker of progress.

And you can debate if that was enough in the year that was the hottest year on record in 2023 as well. But I think there have been some positive signs. Obviously, we have to focus on fossil fuels, unsurprisingly. And there I think one of the positive developments is the US signing up to the Powering Past Coal Alliance, and we’re pleased to see that, we’ve been a member of that since 2021.

And that means that for the US now, moratorium on new unabated coal plants and also phasing out of unabated coal power generation. So we take that as a positive sign. I think obviously the focus on the tripling of renewables can be important in transition financing, but we are going to need to see continued increased commitment actually from governments on grids and connectivity and on permitting.

Also, I think what we’re really encouraged by is that nature is just permeating all conversations on climate now, the two are so interconnected. That is going to be a continued focus for us as well into 2024.

NK: What were some of your key engagements for 2023, where were your success stories?

EG: There’s one I’d like to pick out perhaps from colleagues working in Asia, which demonstrates global approach, but with our local knowledge and implementation.

We’ve been engaging with a Chinese dairy production company and distributor and been engaging for a few years now. It is a good relationship that has involved looking firstly at corporate governance and climate and then last year we started looking at deforestation engagement, because there’s a connection with the dairy industry and looking at in line with our deforestation framework that we published in 2022. So we engage with them around deforestation policy, and that involves not just in private engagements and meetings, but also local visits.

One of my colleagues went out to visit one of the local organic dairy plants that was looking at the close loop, some circular economy technology and approach that they’re taking. There’s some way to go, but they published last year and they’re the first in the Chinese dairy industry to do so, a forest protection policy, which is a zero deforestation commitment across the supply chain by 2030.

There is still some way to go, but I’m really pleased to see how that’s developing. And so that’s been a really positive engagement.

NK: How are you focused this year in terms of engagement themes? What are you really looking at?

EG: I’ve put out an approach that we actually articulated two years ago now, but starting to look in our investment beliefs that systemic risks and systemic themes so recognising that there are issues that affect whole swathes of the market, not just individual companies that in so we can continue to engage with individual companies, but we’re increasingly informed by prioritisation of those engagements through the systemic theme lens.

And so we’re looking at climate change is an obvious one and broadly recognise the systemic risk. Increasingly nature loss as well, but also social disparities and strong and effective governance. So four key themes that we’re increasingly used to prioritise, and particularly looking at those where there’s an intersection between those topics. I think the deforestation I mentioned in the previous example is a good example of the intersection between climate change and nature loss, because deforestation is a key driver of both climate emissions in terms of forests, carbon sinks and also unfortunately deforestation is a key driver biodiversity loss. So if you can tackle that, you’re grappling with two of those systemic issues. I just wanted to pick up on the governance point there.

NK: What are you really focusing on? We run a Campaign for Better Governance within the investment industry at ESG Clarity, it would be interesting to know what you’re looking at.

EG: Yes, it will be a continued focus that we’ve had for many years now on strong and effective governance at the corporate level.

We set out very clearly our expectations, in our voting guidelines and policies, for example. But I think it also extends beyond engagement with individual corporates on that, which is where you’re then starting to think about general themes. For example, this year is a key election year, you’ve got national elections in 50 countries, which is going to involve over half of the world’s population.

It’s a big year, and last year we signed up to a set of standards, the Global Standard on Responsible Climate Lobbying. I think there’s increasing focus on the lobbying and policy engagement activities of corporates. I think you can look at both effective corporate governance at the level of corporates, but you’re also looking at wider issues around political engagement.

And that’s been a theme that we’ve looked at in our climate engagements for some time now. But I think it’s not just applicable in lobbying around climate, but around other topics as well. We’re creating looking at firms’ governance oversight, effectively their own political engagement activities.

NK: I wanted to address some of the criticism that we’ve seen.

There’s been some reports that we’ve covered ESG Clarity that say asset managers are talking the talk, but not walking the walk of engagement. Some reports from, for example, from Reclaim Finance, ShareAction, and recently the FCA said generally stewardship approaches are not meeting their expectations. Do you think this is a fair criticism of the wider industry?

See also: – How to build an effective stewardship programme

EG: I think it’s linked to the growing up of the industry and, again, I think that brings increased scrutiny, which is only right and correct. We welcome that debate and that scrutiny and increased transparency activities is an area, and it’s why I find it so exciting to work in an area where standards are moving and best practices evolving. You need that dialogue and you need that reflection from other bodies to look at what good practice is.

I think into this year we will see more nuanced discussion perhaps around voting and specifically around votes against management.

And I think about other measures that external stakeholders can use to look at how asset managers are holding companies to account, which is our role, that use of sort of aggregate statistics on votes against management can be used as a bit of a crude proxy, but it’s a proxy measure. As in more votes against goods, if you vote, as I think it’s a more nuanced picture than that.

But until and unless as an industry, we will say these more from reporting on activities to reporting on progress. And what do tools such as those against management actually inform potentially in terms of company behaviour change then you will continue to have that rather crude measure. I think I’m excited to see how as an industry we respond to that challenge and start to look really on the shift in reporting on activities and towards reporting on progress so that you’ve got a more nuanced discussion around how change happens, which is often multi-year.

NK: Yeah, that’s really interesting. Thank you. And do you work with other asset managers on engagement? How do you collaborate?

EG: Yes, the Chinese dairy company I talker about earlier that was a collaborative engagement. It’s not unusual at all for us to be engaging with peers. That can be, but not always, a more effective approach.

But it’s also not limited collaboration to direct corporate engagements. And you can also use it in terms of the standard development, like I mentioned, the global standards on responsible climate lobbying that was developed by peers in the industry. And we found it absolutely essential in our own learning. So when we put out the nature roadmap at the end of last year, that was definitely informed by civil society work, by industry initiatives, and we’ve been a member of the Finance for Biodiversity Initiative for some time and from a really useful peer-learning group. We’re going to be pushing out, as we co-chaired the task force’s working group they’ve got on target setting, we will be producing some guidance later this year for asset managers on that. So from that it’s a really useful forum.

NK: Final question, what would you say is your outlook for sustainable investment? Is it more of that growing up or we moved on a bit further from that?

EG: Yeah, I think it is. It continues to grow up. As I say, the best practice will continue to evolve and standards will continue to shift, that’s why I find it such an interesting area to work in.

But I’m, I think this idea of these systemic risks is going to play out more. So you’ve got risk at the individual corporate level, of course, which might be somewhat idiosyncratic to that particular company, but then you have these broad themes which there’s nowhere to hide from, and you can’t diversify away from when you’re a globalised, diversified asset manager such as Fidelity International.

So really looking at how we can use the resource we have in a really targeted way, we can’t solve those of systemic issues that huge. But we can certainly contribute to them and see the various tools that we have in our toolbox. And as I said, we will do that across those core themes of climate change, nature loss, social disparities and good and effective governance.

NK: Well, thank you, Emilie. Thank you for sharing your insights with us. And yes, I completely agree. Great part of the world to be working in.

And thank you to all our viewers watching. Look out for more special interviews on


Natalie Kenway

Natalie is editor in chief at MA Financial covering ESG Clarity, Portfolio Adviser and International Adviser. She was previously global head of ESG insight for ESG Clarity and has been an investment journalist...