Legal & General Investment Management, one of the world's largest asset managers, today released its annual Climate Impact Pledge increasing the ambition of its engagement programme.
Using quantitative metrics, including LGIM's proprietary climate modelling climate ratings for over 1,000 companies in key sectors will be publically available under a ‘traffic light' system on LGIM's website. More than a ten-fold increase in number of companies covered, the selected companies are responsible for over 60% of the greenhouse gas emissions from listed companies.
Companies identified as falling short of LGIM's minimum standards - e.g. lacking comprehensive disclosure of emissions or key sustainability certifications - will be subject to a vote against and potential divestment from select funds. LGIM intends to ‘ratchet up' the stringency of both its standards and sactions over time.
There is mounting evidence that firms that put sustainability at the heart of their strategy perform better, too. It is vital that asset managers like LGIM must continue to use their influence to accelerate the sustainability revolution across all sectors."
The announcement comes as independent analysis highlighted LGIM's strong voting stance, with LGIM being a top supporter of ‘climate-critical' shareholder resolutions compared to the world's 12 largest asset managers.
In 2016, LGIM committed to engage with around 80 of the largest companies in the energy, transport, food retail and financial sectors around the strength of their sustainability strategies. Companies demonstrating best practice were celebrated publicly, whilst LGIM voted against and divested poor climate performers - including ExxonMobil - from its Future World range of funds.
The programme has contributed to positive steps taken by companies such as Dominion Energy, with LGIM announcing Japanese automaker Subaru - previously on its exclusion list - will now be reinstated in its Future World funds following improvements in emission targets and disclosures.
Since 2016, consensus has been growing around reaching net-zero carbon emissions globally by 2050 as the safest path to meet the goals of the Paris Agreement on climate change. The growing urgency has been met with significant improvements in the availability of climate data and analytics in the market. In light of these shifts, LGIM is now strengthening its Climate Impact Pledge through expanded coverage and focused company and policy engagement around the net zero challenge.
Michelle Scrimgeour, CEO, Legal & General Investment Management and member of UK Government's COP26 Business Leaders Group, commented: "As governments around the world are set to announce new and ambitious climate policies ahead of next year's COP26 conference, investors must also step up. Through our engagement programme renewed to align with the net zero challenge, we want to help steer companies and our clients towards success in a low-carbon world".
Meryam Omi, Head of Sustainability and Responsible Investment Strategy at LGIM, member of the COP26 High Level Champions Team - Finance added: "Inaction on climate change threatens the long-term stability of the market, but we know engagement with consequences can get companies to change. The challenge is having more speed and scale."
"That is why we are combining cutting-edge data with in-depth research into key sectors to support companies that are building resilient strategies, and systematically hold to account those that are not."
Nicholas Stern, IG Patel Professor of Economics and Government at the London School of Economics (LSE) and Chair of the Grantham Research Institute on Climate Change and the Environment, commented: "There is mounting evidence that firms that put sustainability at the heart of their strategy perform better, too. It is vital that asset managers like LGIM must continue to use their influence to accelerate the sustainability revolution across all sectors."