Taking action

Active ownership is the process of engaging with companies, regulators, policymakers, industry peers and other stakeholders around the world. This engagement is to help tackle issues that have the potential to affect society, the planet, and the long-term financial returns for those who invest with us – such as members of our pension schemes.

As a global investor, we can use our influence to identify and improve on important ESG issues in the companies we invests in (those included in our internal funds that are managed by L&G), or through collaboration with policymakers. For example, we can challenge a company to adopt more environmentally friendly policies. It can also engage with governments and regulators on ESG-related policy.

As a shareholder, we can use our voting rights to both signal support for a company or to raise concerns over different issues including how it is governed, its business strategies and activities.

Voting against a company in its Annual General Meeting (AGM) is a powerful engagement tool with which to hold company boards to account and raise market standards.

If a company doesn’t deliver sufficient improvements in ESG standards following engagement, we can exercise its shareholder voting rights against particular proposals or decisions.

We disclose the details of our vote instructions on a per-meeting basis, with the rationale provided for all votes cast against management.

Ultimately, we believe in driving positive change from within and that engaging with companies leads to better outcomes.

We also believe that automatically removing our investments at large scale (divestment) can be an ineffective tool that overlooks the problem that needs to be resolved.

However, we may stop investing or reduce our holdings in companies if they fail to meet minimum ESG standards expected and don’t demonstrate a required commitment to change.

Companies are divested up to the point where they do not cause index distortion and up to a pre-specified tracking-error limit. If the tracking error limit is reached, company holdings are reduced rather than fully divested from. Tracking error is the difference in performance between a fund and its benchmark.

We aim to tackle difficult and inter-connected ESG issues that could materially impact the value of our members’ pensions.

In some cases, change can happen swiftly. In other cases, it can require repeated efforts and time.

The goal is to create better standards for the market at large to bring about more sustainable results over the long term.

ESG risks and opportunities are just one important consideration for companies. We engage with companies in a way that considers the nature and sector of their business and the setting of realistic and meaningful goals and outcomes.

For an overview of our engagement approach, read the Active Ownership Overview document. For more details on our engagement progress achieved in 2024, please refer to our annual active ownership report. Here you will find example case studies and further detail, highlighting where we have been successful in raising standards, and where more work needs to be done.