Our TCFD report
Our policy around climate change and its effect on members’ pensions
We regularly monitor the financial performance of the funds that your pension contributions are invested in to ensure they provide good value and remain fit for purpose. In addition, we consider the effect investing in these funds has on issues that we know increasing numbers of our members care about.
For example, many investors prefer to see their money invested in funds which minimise their impact to the environment, or which actively encourage diversity in the workplace. These types of conscience-led investments are referred to by the term ‘ESG’:
Environment – which covers issues relating to protecting the planet
Social – investing to promote diversity, inclusion and the fair treatment of people
Governance – which is about the way companies are run
We believe it is possible to invest in a way that incorporates ESG factors while helping to reduce long-term risks to your pension contributions. For example, high-polluting industries are facing increasing competition from cheaper, cleaner energy sources. Damage caused by climate change doesn’t just hurt the environment but can cause expensive problems for the companies in which we invest. This means that money invested in these businesses could be at risk.
Task Force on Climate-related Financial Disclosures
We take active steps to identify, assess and manage climate-related risks and opportunities to the Legal & General Mastertrust and report on what we have done. Our reporting requirements are closely aligned to recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD)
The long-term aim of the Mastertrust is to invest your pension contributions in a sustainable way, keeping costs affordable and meeting the financial objectives of your employers. Our objective is to reduce the likelihood that climate-related risks impact on the value or performance of the scheme’s assets. We aim for 100% of assets to be compatible with the net zero emissions ambition by 2050 or earlier, in line with the Paris Agreement.
Climate change is one of the world’s most significant challenges and addressing it is a key responsibility for this generation. Scientific evidence illustrates that we need to act now to reduce carbon emissions to avoid disastrous consequences for our environment and our economies.
We believe that:
- Climate change, and its direct and indirect impact, poses a significant risk for long-term investors.
- In the long term, investments which consider a range of environmental, social and governance (ESG) factors will likely be more able to manage risk and maximise opportunities without compromising returns.
- Climate risk is a significant risk which should be taken into account to ensure all risks and opportunities are captured in terms of the impact on investments.
- Different aspects of climate change can create risks that are sector and region-specific at varying times, and may affect any type of assets held within the investment portfolio.
- Stewardship of assets is critical.