Legal & General Investment Management (LGIM) has announced a fivefold increase in the number of companies it’s engaging on climate change, and pledged to be tougher on corporate lobbying.
The firm revealed today that it has upped the firms covered by its long-standing Climate Impact Pledge to more than 5,000 – from around 1,000 last year.
Five new sectors have been added as part of the expansion: forestry, paper and pulp, aluminium, glass, logistics, and multi-utilities. LGIM flagged the banking, insurance and property sectors as laggards on setting and meeting credible net zero targets, and said that more than a third of companies in oil and gas failed to meet its minimum climate standards.
In 2021, LGIM identified 60 portfolio companies that it considered systemically important in the push towards global decarbonisation. That number has risen to 105, 43 of which will be subject to voting sanctions because of a lack of progress, the asset manager said.
Target companies are expected to produce climate transition plans, along with evidence of how they are pursuing those plans. They must link these objectives to their pay policies, and address biodiversity and social dimensions where relevant.
“There is now one common red line across all our engagements, and that’s climate lobbying,” said Stephen Beer, a sustainability and responsible investment manager at LGIM. “Companies need to make their direct lobbying, and their membership of trade associations and other organisations, consistent with meeting 1.5°C.”
He added: “Policymakers don’t, and shouldn’t, sit in isolation; so we need to see accountability for those interactions.”
“Policymakers don’t, and shouldn’t, sit in isolation; so we need to see accountability for those interactions”
Stephen Beer, sustainability and responsible investment manager at LGIM
Figures published by think tank InfluenceMap last month indicate that corporate lobbying has been a major driver of the growing political pushback against responsible investment practices in the US, with large companies helping to table laws banning ESG in some states.
However, Beer said that LGIM’s decision to focus on lobbying hadn’t been driven by a desire to counter these developments.
“It’s more about thinking about what happens in COP meetings etc, and ensuring that companies are talking the same language that we are about net zero in those meetings,” he explained.
Beer said the Climate Impact Pledge applied across LGIM’s equities and fixed income portfolios, but noted that divestment is the only widely-available escalation tool for debt, as voting rights are reserved for shareholders.
So far, just 14 companies have been divested from LGIM’s portfolio as a result of inadequate progress on climate. Its exclusion list has been expanded to cover nearly $158bn of assets.