LGIM announces in 2021 Climate Impact Pledge report that it will divest from four new companies due to a failure to address the risks posed by climate change.
Legal & General Investment Management (LGIM) launched their annual Climate Impact Pledge report back in 2018 and last year expanded engagement to 1,000 large companies in 15 climate-critical sectors. These sectors are responsible for more than half of greenhouse-gas emissions from listed companies.
Companies falling short of LGIM’s minimum standards will be subject to voting sanctions, as well as potential divestment from LGIM funds.
LGIM will divest its holdings in Industrial and Commercial Bank of China, AIG, PPL Corporation and China Mengniu Dairy for unsatisfactory responses to engagement and breaches of ‘red lines’ around coal involvement, carbon disclosures or deforestation.
LGIM will also be reinstating US food retailer Kroger, which was previously on the exclusion list, in relevant funds. This follows improvements in deforestation policies and disclosure, as well as efforts to promote plant-based products which have a lower climate impact.
Heightened engagement to drive progress
LGIM’s expanded approach pursues a programme of deeper engagement with 58 influential companies yet to embrace the transition to net-zero carbon emissions.
LGIM has been encouraged by the progress made over the past year, with almost three-quarters responding to its engagement campaign and 13 of the 58 companies now having a net-zero target in place.
LGIM announced last year that it would make climate ratings, using a ‘traffic light’ system, for 1000 global companies, and has decided to further expand its voting sanctions for companies that do not meet minimum standards.
This includes having board members with responsibility for climate issues, comprehensive carbon disclosures and greenhouse gas reduction programmes.
During the 2021 proxy season, 130 companies have been subjected to these voting sanctions, with the banking, insurance, real estate and technology and telecoms sectors the most highly sanctioned through a vote.
Michelle Scrimgeour, Chief Executive Officer, Legal & General Investment Management and co-chair of the UK Government’s COP26 Business Leaders Group, comments:
“Climate change is one of the most critical sustainability issues we face and we fully support efforts to align the global financial system with a pathway well below 2°C. We have made a strong commitment to push forward this agenda across the different parts of the investment chain, from our engagement with companies and policymakers through to our own investment process and LGIM’s own commitment to net zero. Participating in forums like the COP26 Business Leaders Group, ahead of the pivotal climate conference in Glasgow later this year, has emphasised the necessity of coordinated action to address climate risk and steer society towards a sustainable future. Progress cannot be made by acting in isolation and we, as investors, have a real role to play in the responsible allocation of capital and acting as stewards to our investee companies to encourage greater progress to meet our overall sustainability goals.”
“In the past year I have seen multiple ways in which we at LGIM are tackling the climate change challenge – coming together in forums such as this, as well as the Net Zero Asset Managers Alliance launched in December and most recently the Glasgow Financial Alliance for Net Zero.”
Yasmine Svan, Senior Sustainability Analyst at LGIM adds:
“Improvements in data and analytics have allowed us to increase our coverage and to enforce what we consider to be minimum standards with regards to climate risk management, through expanded voting sanctions, supplemented by our in-depth engagement with pivotal sectors. At the same time, as investors step up their scrutiny of companies, so too are companies raising their ambitions. We are pleased to be able to add to the number of companies reinstated in our funds following progress and will continue our engagement and collaboration to help increase overall standards across markets.”