Gustavo Bernal Torres
ESG Strategy Too Hot for SEC Is Attracting Fund Bosses in Europe
An ESG strategy that’s too controversial for US regulators and some major ratings companies has been embraced by Fidelity International and other European financial firms as a way to safeguard long-term returns.
Double materiality, whereby an investor doesn’t just screen for the environmental, social or governance risks facing their portfolio, but also measures its ESG impact on the world, isn’t incorporated in Securities and Exchange Commission rules or proposals. Nor does it shape the bulk of ESG ratings provided by firms such as MSCI Inc. But in Europe, the idea is gaining serious traction in the market and among regulators.
Fidelity, one of the UK’s biggest money managers with more than $665 billion in assets as of June 30, now applies double materiality across all managed assets after incorporating the strategy earlier this year. In so doing, Fidelity hopes to capture financial risks that more traditional analysis might miss.