LGIM’s Climate Impact Pledge: the 2021 results

The 2021 United Nations Climate Change Conference (COP26) takes place in November, and I am delighted that I will have the opportunity to participate as co-chair of the COP26 Business Leaders Group.

As I write this today, I do not yet know whether we will be able to attend the meeting in person. I do know, however, that whether the event is virtual or not, we collectively must deliver real action.

The questions, of course, are what actions to take and how to persuade those who have reservations about the actions required – those who feel the time is too early or too late, the costs too high, the status quo acceptable.

To them, I believe we can make a positive case for action – one of innovation and the growth potential of a greener economy, but just as importantly one that does not leave anyone behind. It is in this context that I am excited to share the latest update from our longstanding engagement programme, the Climate Impact Pledge.

The report shows that progress is being made across many of the most climate-critical areas of the global economy, although much remains to be done. It also contains a case study of a company from which we had previously divested for falling short of our minimum climate standards, but which has demonstrated sufficient improvement following our engagement efforts to be reinstated to select strategies. Equally, the report details the decisive sanctions we have imposed where companies have not met our expectations.

Inaction is not an option

In clearly setting out these expectations for climate-critical companies, I believe furthermore that this report provides some answers to that first question of what action can and should be taken. Within our own business, for example, we call for an investment transition from ‘brown’ to ‘green’ projects and assets.

I am proud that LGIM is a founding signatory of the Net Zero Asset Managers Initiative, while our default DC pension funds – representing over four million members – have set interim targets to support their 2050 net-zero ambitions and our parent group L&G is aligning its balance sheet to net-zero emissions.

Each of the companies in which we invest on our clients’ behalf has many stakeholders beyond us as asset managers, including its employees and suppliers. Climate change will affect every single one of these stakeholders, not least given its growing financial materiality, so we must use our influence as shareholders to raise standards across the entire market for the benefit of all.

In so doing, we can deliver upon the promise of inclusive capitalism and create a better future through responsible investing.