Legal & General Investment Management (LGIM) has today released its annual Climate Impact Pledge report, revealing that it will divest from four new companies, due to insufficient action to address the risks posed by climate change.
Launched in 2018, this is the first Climate Impact Pledge report under LGIM’s strengthened approach announced last year, which saw LGIM commit to expanding its engagement to 1,000 global companies in 15 climate-critical sectors, that 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 with £58 billion in assets, including funds in the Future World fund range, and all auto-enrolment default funds in L&G Workplace Pensions and the L&G MasterTrust.
This year, 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/or breaches of ‘red lines’ around coal involvement, carbon disclosures or deforestation. These companies are in addition to China Construction Bank, MetLife, Japan Post, KEPCO, ExxonMobil, Rosneft, Sysco, Hormel and Loblaw, all of whom remain on LGIM’s existing exclusion list and who have yet to take the substantive actions required to warrant re-instatement.
LGIM also announced that US food retailer, Kroger, previously on its exclusion list, will be reinstated in relevant funds following improvements in its deforestation policies and disclosure, as well as efforts to promote plant-based products which have a lower climate impact. It joins companies such as automaker Subaru and oil major Occidental Petroleum, that have been reinstated in previous years.
LGIM announced last year that under its expanded approach it would pursue a programme of deeper engagement with 58 companies that are influential in their sectors but are yet to embrace the transition to net-zero carbon emissions.
Following its decision to make climate ratings for around 1000 large companies publicly available under a ‘traffic light’ system, LGIM has further expanded its voting sanctions for companies that do not meet minimum standards, such as having board members with responsibility for climate issues, comprehensive carbon disclosures and greenhouse gas reduction programmes. During the 2021 proxy season, LGIM has subjected 130 companies to voting sanctions, with the banking, insurance, real estate and technology and telecoms sectors the most highly sanctioned through a vote.
Michelle Scrimgeour, CEO, LGIM and co-chair of the UK government’s COP26 business leaders group, said in a statement: “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.”