Legal & General to halve emissions of £81bn pension portfolio by 2030

Legal & General's Retirement arm has pledged to halve the carbon emission intensity of its annuity book, which totals almost £81bn, within a decade.

The commitment builds on Legal & General’s overarching commitment to reach net-zero financed emissions by 2050, announced earlier this year. The firm is in the process of developing Paris-aligned interim commitments.

In order to reach the new 2030 goal, Legal & General Retirement (LGR) has set an interim target to reduce the carbon emission intensity of the book by 18.5% by 2025. It is calculating intensity in terms of Scope 1 (direct) and Scope 2 (power-related) emissions per £1m of investment.

LGR said in a statement that integrating revamped ESG principles into the management of the annuity portfolio will help it to reach the new target.

The statement stipulates that the firm will act in line with the thinking of the UK Government, evidenced through the Pensions Bill, which is currently progressing through Parliament. Pensions Minister Guy Opperman has urged pension providers to prioritise engagement over blunt divestment where possible, to encourage more high-emitting corporates to accelerate sustainability work.

LGR’s updated ESG framework states that new business premiums will be invested in lower-carbon firms and that companies with Science-Based Targets for emissions will receive increased allocation. It also stipulates that the company will strive to invest in projects that generate net-positive impacts, with this concern second only to the need to ensure the safety of policyholders’ returns.

“This document, for the first time, captures our ESG policies in one place for our customers and investors, detailing the key principles that drive our corporate strategy and shape our culture,” LGR’s chief executive Laura Mason said.

“The insurance sector has an important role to play in using pension money to invest in sustainable projects across the UK, and I hope that our new policy document will highlight how we and others  can play our part in tackling climate change.”

Money talks

The UK’s pensions sector is estimated to account for more than £3trn of financing – but most people do not know how their provider has invested their retirement pot.

The Pensions Bill will contain new requirements for pensions providers to disclose information to their customers. In its current form, the Bill will require large pension schemes to disclose the climate-related risks posed to assets in their portfolios by the end of 2022, in line with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD).

Companies including Aviva have urged Ministers to include a net-zero financed emissions requirement. Others, like Nest and Scottish Widows, have said they will go further and faster on divestment.

Sarah George



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