Legal and General divests from climate change ‘laggards’

The pensions and investment fund, which only holds companies that are addressing the long-term financial risks of climate change, has dropped car manufacturer Subaru, Russian energy firm Rosneft Oil, logistics giant Japan Post Holdings, Texas-based Occidental Petroleum, Canadian food retailer Loblaw, Californian firm Dominion Energy, foodservice corporation Sysco and China Construction Bank from its portfolio.

LGIM said it did not hold the eight firms, which it accused of being “climate laggards”, as of the beginning of June, and has pledged to vote against the re-election of the companies’ chairs across its entire range of equity funds.

The move comes as part of the insurer’s 2016 Climate Impact Pledge, which aims to accelerate corporate progress to tackle climate change.

The commitment saw LGIM engage with 84 of the world’s largest companies which it identified as pivotal in meeting the 2C Paris Agreement target, ranking them against more than 50 sustainability indicators to divest in those with weak climate action policies and give greater exposure to those likely to benefit from the transition to a low-carbon economy.

“Climate change is a significant issue for society and investors, and we have a limited amount time to act. Our role is to ensure companies in different industries transition successfully, and therefore we are committed to helping them do that with our Climate Impact Pledge,” LGIM’s head of sustainable and responsible investment strategy, Mayram Omi, said.

“Divestment is a consequence, but it is not the aim; we want to show that the transition to a low-carbon economy is possible and work with companies towards this goal.”

Indicators assessed included whether the firms had a corporate statement that formally recognises the impact of climate change, how transparent they were on their carbon contribution and whether the board composition was “diverse and robust enough” to drive innovation and change.

Climate leaders

As well as exposing the worst stallers on climate challenges, the rankings, which cover the period from April 2017 to April 2018, also singled out a number of companies for praise on their climate engagement actions.  

For example, LGIM praised oil and gas giant Total as a leader in business strategy due to the actions it is taking to put a climate-compliant 2C scenario at the centre of its policies, such as increasing its investments in clean energy and battery solutions.

It additionally highlighted multinational food and drink company Nestlé as a leader in its statement, citing the brand’s pledge to reduce greenhouse gas emissions by 40% by 2020 against a 2006 baseline, and praised French bank BNP Paribas for its transparency in voluntarily disclosing the carbon content of the power plants it finances.

Divestment drive

The rankings come at a time where more and more banking and insurance giants are announcing plans to divest from coal companies. 

Approximately £15bn has been divested by insurers in the past two years, according to an Unfriend Coal Network report, which found that 15 companies had fully or partially cut financial ties by selling holdings in coal companies and refusing to insure their operations.

Nonetheless, there are still concerns the banking and investment industry is failing to disclose and take action on climate-related risks. For example, two reports have claimed that some of the UK’s biggest pension funds are failing to address climate-related impacts, while 25 of the world’s largest insurance brokers continue to invest in coal or tar sands projects.

Sarah George