Delivering net zero by 2030 is “unrealistic” for most companies and many of them are also off track for the UN-agreed target of 2050, Fidelity International’s third annual environmental, sustainability and governance (ESG) analyst survey has revealed.
Only 60% of companies are currently on track to cut their carbon emissions to net zero by 2050, and only one in four will do so by the more ambitious target of 2030.
Despite “good progress”, companies are still facing too many obstacles, but shareholder action is among the factors that can accelerate the trend.
Jenn-Hui Tan, global head of stewardship and sustainable investing at Fidelity, advocated for more participation.
“Our ESG Analyst Survey asks whether companies’ net-zero plans are sufficient. The answer is: not yet and a greater collective effort is needed. Further funding, technological innovation and regulation are just some of the areas identified if we are to close the gap between ambition and reality. But corporates cannot do it alone,” he said.
“Governments, like policy decision makers, have a key role to play in creating an enabling environment for the transition, as does the financial sector through investor engagement, shareholder action and asset allocation.”
One of the strongest findings of the survey was the effectiveness of external actors in changing companies’ behaviour. While more than 60% of analysts said that regulation was one of the three most important factors for driving change, investors, consumers, employees and competitors all have a role to play in shifting environmental, social and governance (ESG) practices.
In particular, analysts reported that investor engagement and shareholder action are among “the most effective ways” of encouraging change in governance, while regulation came first for the environmental and social side of the ESG equation, as the chart below shows.
“What do you think will drive changes in ESG practices at your companies over the next 12 months?”
Source: Fidelity International ESG Analyst Survey 2023
The report also highlighted China’s role, where only about a quarter of companies covered have a net-zero goal in place, compared with a global average of just over half of all companies under coverage.
But the country appears to be “at an altogether earlier and more optimistic stage of its journey” since 2020, when president Xi Jinping issued a pledge that the country would hit peak CO2 emissions by 2030 and achieve carbon neutrality by 2060.
“Of all regions in our survey, China arguably has the most capacity to move the dial on the implementation of sustainability, especially when it comes to cutting greenhouse gas emissions,” Tan said.
“Positive progress is being made but the survey shows Chinese companies have a lot of catching up to do, and fast, if they are to get in step with the government’s targets for cutting emissions at the national level.”
The report gathered the views of in-house analysts across the world, aggregating bottom-up information from 15,000 individual company interactions on ESG