Environment

The climate is changing globally. There is overwhelming scientific consensus that greenhouse gases emitted as a result of human activities are causing global warming. The global temperature increase we will experience in the coming decades will have a profound impact on world economies, and therefore on people’s lives – from where people live, to how people earn a living.

Climate change carries risks to investments. Not only can extreme weather events like floods and fires affect companies’ profits, but high-polluting industries are facing increasing competition from cleaner, cheaper energy sources. As investors, we are in a powerful position to effect change.

Successfully limiting climate change means that we need to emit no more planet-warming greenhouse gases into the atmosphere than the earth can absorb – this balancing point is known as net zero emissions.

This simply means that the things that absorb carbon in our natural world – trees, soil, oceans and new technologies for carbon capture – need to match the things that emit carbon (industry, agriculture, energy and other activities).

Governments around the world, including the UK’s, made commitments to keep global warming below 1.5 degrees Celsius under the 2015 Paris Accord. As part of this commitment, we’re working with the companies in which we invest on your behalf to reduce emissions, with the aim of making your retirement savings invested by Legal & General net zero by 2050. We’re setting out a series of targets to ensure we’re on track to achieve this. Your money is invested in building a future where we’ll all want to live and we and the natural world around us can flourish.

Our Climate Impact Pledge underpins the way we invest. We score the companies that we invest in on your behalf so we can track which are actively committed to working towards reducing carbon emissions.

We are optimistic that progress is being made, but if companies show signs of inaction, we will vote against them. As a tool of last resort, we will remove our investments in such companies from some of our funds.

In 2021 we saw the following results:

• BP committing to substantial production cuts this decade as part of its strategy towards net zero
• Ford and Honda announcing net-zero by 2050 targets, and General Motors committing to carbon neutrality by 2040
• JPMorgan announcing plans to align its financing of three sectors with the goals of the Paris Agreement
• We removed our investment from four companies for failing to respond satisfactorily to our engagement efforts and will vote against 13 more
• 130 companies are currently subject to voting sanctions for not meeting our minimum climate change standards

*Towards the end of 2022, LGIM increased the scope of the Climate Impact Pledge now assessing 5,000 companies from a previous 1,000 and increasing climate-critical sectors from 15 to 20.  These figures will be updated in the next annual Climate Impact Pledge report.