The future is what we make it. Make it count
As a pension saver, you are an investor. As your pension provider our main aim is to protect and grow your retirement savings.
There are many different factors that are both a risk and an opportunity to the growth of your pension. A responsible investing approach enables us to focus on a key area, which is the management of Environmental, Social and Governance (ESG) practices.
ESG issues include things like, climate change, fair work conditions, executive pay, supply chain management and impact on local communities.
These issues are directly linked to your pension through the assets your pension is invested in, such as equities which are shares in companies.
We consider ESG issues as part of our decision-making process, for the funds we manage directly. Funds managed by external fund managers may take a different approach. As a global investor, we aim to use our influence to encourage:
- companies to integrate ESG factors into their culture and everyday thinking,
- markets and regulators to create an environment in which good management of ESG factors is valued and supported.
This approach helps us to manage investment risks and opportunities and seek the best possible financial returns for you.
Watch the following video for an overview on ESG and why it matters to your pension
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You may have heard the term ESG linked to pensions, but what exactly is it? And why does it matter to your retirement savings? ESG stands for Environmental, Social and Governance. Environmental relates to a company's impact on the planet.
Social examines how a company treats its employees, communities and customers. Governance focuses on a company's leadership leadership structures, accountability, and transparency. Along with interest rates, inflation, or economic uncertainty, ESG practices are also an important thing to consider for pensions, particularly when it comes to company performance.
Companies can be included in a pensions investment mix through buying their shares or lending money to companies by buying their bonds. And when it comes to ESG practices, companies, everything is connected.
For example, a company's business activity may have a negative impact on the environment. Or a company could damage its reputation and lose profits by mistreating its workers. So ESG practices are important to not only company performance and potential pension value, but to wider society and the planet too.
and General Investment Management, referred to as LGIM, considers how the companies it invests in are managing ESG-related risks and opportunities. Including ESG in the investment process doesn't mean that all companies in a pension fund are already fully sustainable, unless it is a broad exclusion or impact fund.
Pension funds generally include a range of companies and sectors, for example oil and gas companies, However, through its role as a global investor, LGIM works with the companies it invests in, challenging them to become more sustainable and adopt better ESG practices.
There are different ways that ESG can be included in a pension fund. To find out how, go to the Legal & General Workplace ESG Hub and read the Responsible Investing Fund Guide. More information on how LGIM engages with companies is available in the Active Ownership Report, also found on the ESG Hub.
So, we see responsible investing as the incorporation of ESG considerations into investment decisions, alongside engagement with companies, regulators and policymakers, to help create positive change.
The rest of this site provides examples of how LGIM does this, including the Active Ownership and Climate Impact Pledge reports.
The ‘your investment choices’ section provides a responsible investing fund guide, matching funds to specific responsible investing characteristics. Some funds may not have a mandated sustainability objective but may still include responsible investing approaches as part of the overall investment strategy. Where a fund does include responsible investing, it doesn’t necessarily mean that ALL assets held by that fund can be considered sustainable. Pension funds generally include a range of companies and sectors.
LGIM’s responsible investing policies and frameworks
LGIM’s responsible investing policies and frameworks are published online. These include policies on biodiversity, deforestation, climate change, controversial weapons, coal, diversity and engagement.
These policies are available for everyone to view but were created with investment professionals in mind. This means the communication style and terminology used is more technical than the standard communications you might receive.
You can read the full set of policies on the investment stewardship webpage.
Environment
The action we are taking to protect the wellbeing of our planet.
Social
What we're doing to promote diversity and inclusion.
Governance
How we ensure companies are well run.
Find out more
Taking action
Find out how we've influenced companies to achieve better environmental, social and governance outcomes.
Your investment choices
Find out how a pension can be invested responsibly.
The value of your pension savings can go down as well as up and is not guaranteed.
Most of the activity described on this site is carried out by Legal & General's Asset Management who manages your funds and makes the day-to-day investment decisions.
All our funds are managed by professional fund managers but some of the funds available to you are not managed by Legal & General. External fund managers may take a different approach to responsible investing.
Throughout this site, we use companies as examples of the action we take. The issues highlighted are not exclusive to them.
Reference to a particular security is on a historic basis and does not mean that the security is currently held or will be held within an L&G portfolio. The information on this site does not constitute a recommendation to buy or sell any security.