Sustainability Report

Welcome to our third report on climate-related matters, and our first Sustainability Report.

Covering the year up to 5 April 2024, the report details the ways in which climate and sustainability related risks and opportunities are considered across the Mastertrust’s investment decisions and risk management approach. This includes an analysis of the actions taken by the Trustees of the Mastertrust, as well as Legal & General in its role as primary investment manager.  

This year, alongside our full climate-related disclosures, we have also included disclosures related to nature and people. Climate remains our most significant sustainability issue and has close links with changes in both our natural world and our societies.

Please note a previous version of this report contained incorrect Climate Engagement metrics. These were updated in the report on 3 December 2024.

Read the full report

 

Sustainability Report summary: key highlights 

 

1. We agreed new long-term sustainability objectives and expanded our governance framework

Our new sustainability objectives are:

• Improve outcomes for members
• Build a better society

Our objectives are designed to guide the future actions that we take on behalf of the members of the Mastertrust.

We meet with Legal & General twice each year to discuss climate, nature and people. Once to discuss its priorities for engaging with companies that we invest in over the year ahead, and once to review the outcome of these activities. We’ve also adopted Legal & General’s Exclude, Enhance, Engage approach, which is designed to help push for real-world change that we believe will benefit our members and support a stable global economy.

2. We have included more analysis in this year’s report, across climate, nature and people

For the first time, we have taken the step to explore our nature-related risks by examining the risks 10 key sectors are exposed to. We have also taken the step to document our approach to considering the risks and opportunities that cannot be captured purely in our models. In particular, this year we have explored the way that sustainability-related shocks could impact those of you in retirement and how we manage this risk on your behalf.

3. Over the last year, there has been a reduction in the reported carbon footprint of most of the funds in scope, based on Scope 1 and 2 emissions

Carbon footprint (Scope 1 and 2) of the Legal & General Mastertrust’s default investment options, tonnes CO2e per £1 million Enterprise Value Including Cash (EVIC), change from 31 March 2023 to 31 March 2024

Scope 1 emissions are owned and controlled directly by a company. For example, emissions through company vehicles, company office space and equipment, and the energy used in production of goods or services.

Scope 2 emissions are made indirectly by a company through use of purchased heat, steam, cooling, or electricity. These emissions are a result of a company’s activities for its own operations – for example to heat its buildings – but are not owned or controlled directly by it.

Carbon footprint is the amount of emissions as a result of the associated activity.

4. All of the default investment options have surpassed their 2025 decarbonisation pathway plan to reduce carbon emissions. The Target Date Funds, where most of you are invested, are also at, or ahead of, their 2030 goals

Data can have a big impact on our decarbonisation numbers, so we consider these numbers carefully to assess whether we are making real progress. We were pleased to see that, this year, Legal & General strengthened several key exclusion and engagement criteria, which has helped to deliver on our net-zero targets.

This included introducing a ‘no new coal’ policy which added companies that are expanding their thermal coal mining and/or power generation capacity to the Future World Protection List, Legal & General’s exclusion criteria used across all Future World funds.

5. Our data coverage for Scope 3 emissions has increased dramatically – however, so have our Scope 3 emissions

Scope 3 emissions are generated before or after a company’s operations. This includes those generated by a company’s suppliers, or by the transportation of its products to warehouses or the consumer.

Last year we included Scope 3 emissions for the first time in our TCFD report. Our aim is to develop targets for Scope 3 emissions reduction in the future, however current data for Scope 3 emissions can be subject to big changes which make it difficult to track progress. As data, and the way we analyse it improves, sometimes emissions will go up between years.

"The interdependencies between climate, nature and people are of critical importance. A changing climate threatens natural ecosystems, and nature loss amplifies climate change by reducing the ability of ecosystems to store carbon. These factors equally play out in the social sphere. Challenges such as income inequality, access to the living wage and human rights not only make it harder for us to address climate and nature issues – they exacerbate them.

"That’s why we have incorporated these additional pillars into our first Sustainability Report, which builds on our TCFD reporting work by recognising the ways in which climate, nature and people present financial risks and opportunities for our Mastertrust members. We recognise there is a lot more to do but see this as a really positive step in the right direction and would like to see others in the sector follow suit, recognising the scale of the structural challenges we face."

Tegs Harding, Chair of the Mastertrust’s Investment Committee