The 2026 Sustainable Global Leaders Conference was held in Shanghai from October 20 to 22 at the Huangpu Expo Park, according to an October 20 report.
During the event, Wang Fang, Global Head of Investment Stewardship at Fidelity International, said in a conversation with financial media that sustainable investing in China has evolved in recent years from being driven by hot topics, when sustainability or ESG was simply reduced to green investing, toward a more mature and systematic framework.
ESG funds on the market now go beyond green themes to include more ESG integration, and some products focused on social themes have also appeared, she said.
Wang noted that people are now beginning to distinguish between an investment portfolio and the real-world impact that investment brings. "Many times we can have a very green portfolio, but that portfolio may not necessarily bring change to the real world."
"A fund manager can very easily lower a portfolio's carbon emissions simply by selling high-carbon companies, but that behavior does not mean the real world has achieved decarbonization, because although these companies are not in the portfolio, they still exist, still operate, and still emit," Wang said.
She said more and more clients now want not only a green investment portfolio, but also hope to contribute to real-world environmental improvement or social progress through their investment behavior.
Sustainable investing turns a black-and-white picture into a color one
On how to view sustainable investing, Wang said it is not an entirely new investment approach. It simply pays more systematic attention, within the traditional bottom-up fundamental investment process, to issues that can affect a company's long-term development, such as climate change, water pollution, employee benefits, and talent recruitment and development.
"From this perspective, you can see its impact on the investment process. It actually allows investors and fund managers to see more comprehensively the various risks a company will face in its operations," Wang said.
Wang gave this example: "In the past, when doing financial analysis and operational analysis of a company, what you saw was a black-and-white picture of the company. Now, after adding sustainability or ESG factors, this black-and-white picture becomes a color picture. Theoretically, this is more conducive to a comprehensive understanding of the company."
Wang said that the G in ESG, namely corporate governance, is essentially about the quality of a company's management and the effectiveness of its board of directors. This cannot be judged simply by looking at how many independent directors or how many female directors a board has.
She said Fidelity International's advantage is that it has more than 200 industry analysts globally, each with five to ten years of experience tracking companies, which gives them stronger ability to judge the quality of management and the substance of board effectiveness.
"With a more sufficient base of information, investment decisions should be more optimized," Wang said. Under this logic, sustainable investing should actually have a positive impact on investment returns.
Wang also mentioned, "The only exception I want to emphasize is that some sustainable investments do have their own negative screening conditions, meaning certain industries cannot be invested in because of clients' value orientations."
She said that when the investable universe is narrowed and excluded industries are very hot, this may have a negative impact on portfolio returns in the short term. But if it is a portfolio that integrates ESG considerations, the ultimate effect is still to help expand the breadth and scope of information to be collected and help improve the quality of investment decisions.
Post-investment management is the most effective way to drive governance improvement at listed companies
Asked about how sustainable investing has driven governance improvements at A-share listed companies in recent years, Wang Fang, Global Head of Investment Stewardship at Fidelity International, said sustainable investing actually has many methods and components. In Fidelity's practice, the concept of post-investment management, or stewardship, is also a very important part of sustainable investing.
"After we make an investment decision and become a shareholder of a listed company, it is not that the work is done. We will continue to pay attention to this listed company and actively exercise shareholder voting rights," Wang said. For example, if a listed company wants to make major buy or sell decisions, in the Chinese market such decisions usually need to go to a shareholder meeting. As shareholders, investment institutions actually have a lot of say. If there is some disagreement with management's judgment, or if they do not fully understand why such a decision is being made, they will conduct post-investment management, communicate deeply with the listed company, share some views, and express some demands.
She acknowledged that there are also examples where they really vote against proposals they do not agree with, using shareholder rights to stop things they believe are detrimental to the listed company's value creation.
Wang said that in the communication process of post-investment management, in addition to major business decisions, they also communicate with listed companies on various core corporate governance issues such as board appointments and re-elections, executive compensation design, auditor re-appointment, and auditor compensation setting, sharing views and expressing demands.
"In the process of such communication, there are actually many cases where listed companies, after hearing our ideas and demands, did indeed make changes to some core governance structures," Wang said.
Wang stressed that post-investment management is in fact the most effective method within sustainable investing for driving governance improvements at listed companies.
Do not think of ESG as all-powerful, nor as powerless
Regarding some misunderstandings in the market about sustainable investing, Wang Fang, Global Head of Investment Stewardship at Fidelity International, told financial media that after several years of development, people's understanding of ESG investing has become very mature, but some misunderstandings do still exist. One of the more troubling ones is equating or opposing ESG integration with improving investment returns.
Can ESG investing necessarily have a positive effect on investment returns? Wang acknowledged that there are areas where it can help, but there are also some ESG integration methods, such as supply chain screening, that in certain market environments can indeed have an adverse impact on portfolio returns.
"In the end, we must recognize that ESG is only one factor in investing. You still need to know what the company does, what products it makes, what services it provides, whether there is market demand for those products and services, whether competition in its sector is very intense, and whether the policy environment is improving or not. Even if a company's fundamentals are very good, you still have to look at its price and whether it is very expensive at the current stage. A very good company is not necessarily a very good stock," Wang said.
Wang said many factors can have an important impact on the outcome of investment decisions, and ESG is only one of them.
Wang pointed out that one should neither think of ESG as all-powerful nor as powerless. "It is actually just one factor in investing. What is very special about it is that when we do this well, not only can investment generate returns, but companies can also reduce pollution in their operations and fulfill social responsibilities more effectively. It has positive externalities."
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