Legal & General Investment Management (LGIM) plans to divest from four new companies, due to insufficient action to address risks posed by climate change.
The announcement was made as the asset manager hosted its Sustainability Summit this morning and released its annual Climate Impact Pledge report.
Launched in 2018, this is the first Climate Impact Pledge report that sees 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 £58bn (€67.3bn) in assets.
The firm announced that this year it will divest from 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 that have yet to take the substantive actions required to warrant re-instatement, it said.
LGIM noted 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.
Heightened engagement to drive progress
Under its “engagement with consequences” programme last year, the manager saw positive results, vowing to engage with 58 companies that are influential in their sectors but are 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, it said.
Michelle Scrimgeour, LGIM’s chief executive officer and co-chair of the UK government’s COP26 Business Leaders Group, said: “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.”
She said LGIM had made a strong commitment to push this agenda forward across different areas of the investment arena, from its engagement with companies and policymakers through to LGIM’s own investment process and commitment to net zero.
“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,” she said at the summit.
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