Legal & General’s DC pensions, including its master trust, will achieve 65 per cent reductions by 2030 as part of its new roadmap to net zero by 2050.
Publishing the commitment alongside its tenth Active Ownership Report, L&G has pledged to reduce the carbon intensity of the workplace pensions of over 4m DC savers, including those in the L&G WorkSave Pension Mastertrust, by 50 per cent by 2025.
The commitment impacts £53bn of assets, which will be invested in a strategy that incorporates a journey towards Paris Agreement goals of a 1.5 °C degree scenario.
The announcement means the provider will retain its stewardship approach towards addressing climate change, by engaging with boards, but will beef up its divestment activities that have already seen it divest from Exxon Mobil.
LGIM’s ESG approach has also seen it divest from Occidental Petroleum for not having net-zero targets, but then reinvest in it when it became the first US oil company to set itself net zero- targets for scope 1, 2 and 3 emissions, which includes emissions by customers. Occidental Petroleum’s climate strategy involves capturing carbon and storing it in depleted oil fields.
L&G’s framework will lead to 50 per cent reduction in carbon emissions intensity within its Multi-Asset Funds and c. 60 per cent for Target Date Funds, with the growth phase targeting 65 per cent. L&G has also established a roadmap to enable the Mastertrust’s auto-enrolment defaults to target reduced carbon emissions intensity, including the setting of minimum climate expectations for investee companies. All targets are relative to end-2019 data and focused on portfolios’ listed equity and publicly traded corporate debt exposure.
LGIM has already achieved an estimated 23 per cent carbon emission intensity reduction on default multi-asset funds, compared to what it would have otherwise been end of 2019, and an estimated 30 per cent on its Target Date Funds, with a further 20 per cent by 2025 and then a further 15 per cent by 2030, all relative to end of 2019. It has also transitioned £11bn within its default funds equity exposure from a standard market cap weighted index to tracking indices which enforce minimum standards on investees.
LGIM head of defined contribution Emma Douglas says: “As the UK’s largest DC provider, we are fully supportive of achieving the target of net-zero by 2050 and the roadmap we are setting out today provides further detail as to how we plan to de-carbonise our own range of auto-enrolment defaults and those of the L&G Mastertrust. Climate change is the defining challenge of our generation and an area of great concern to many of our members. As the innovations and change required to deliver net-zero materialise, we will continue to evolve our roadmap for the coming years and use our proprietary framework to monitor the progress. Our roadmap to net zero is a significant step in assuring our members that their retirement savings are influencing real change.”
Dermot Courtier, independent chair of the L&G Mastertrust and Independent Governance Committee says: “Managing climate-related risks on behalf of our members is a crucial financial factor and a key priority for the Trustee Board. We are delighted that L&G has followed up on their commitment to net zero within the default funds with this clear ESG and climate change roadmap to enable us to ensure the long-term performance of our investments and improve member outcomes in retirement. These timelines and milestones will further support us in overseeing the progress to net zero on behalf of our scheme members and we look forward to collaborating with L&G as we progress on this important journey.”
Richard Curtis, Co-Founder at Make My Money Matter says: “This ambitious announcement from Legal & General shows that the race to the top among pension providers is picking up pace. Since we launched our campaign to green the UK’s pensions industry, schemes have been making more and more ambitious commitments, and L&G’s pledge shows what is possible when providers harness the power of our pensions to build a better world. Their target of reducing emissions by 65 per cent by 2030 is particularly encouraging, and demonstrates the speed and urgency required by providers to combat the climate crisis. When I spoke with L&G members last year I heard loud and clear that they wanted to see their pensions go green, and it’s fantastic that these voices are being heard. Now is the moment for the rest of the industry to follow suit and ensure that by November’s COP26 summit everyone in the UK has a pension they can be proud of.”
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