As one of the world’s largest asset managers, Legal & General Investment Management (LGIM) has a responsibility to engage with the companies it’s invested in with the aim of bringing about positive change on crucial environmental, social and governance (ESG) issues.
In April, LGIM published its eleventh annual Active Ownership report, which outlines the decisive action it took in the past year. LGIM’s Investment Stewardship team, made up of 22 professionals with an average of 11 years’ experience, engaged with 571 companies worldwide in 2021, including *Moderna, *Starbucks, *Microsoft, and *ExxonMobil.
As at the end of 2021, LGIM managed £290 billion of assets in responsible investment strategies, and over the course of the year voted on more than 180,000 resolutions. Every vote brings us closer to realising our vision of inclusive capitalism – where the benefits of economic growth are broadly shared.
Climate change
In 2021, the climate crisis became even more difficult to ignore. Countries around the world came together at a seminal conference on climate change, known as COP26, to forge the Glasgow Climate Pact, which aims to keep global warming below the crucial level of 1.5˚C.
Climate change was right at the top of the agenda for LGIM’s Investment Stewardship team, which had 246 engagements on it over the course of the year.
Through its Climate Impact Pledge, LGIM is targeting companies that are still yet to achieve best practice in their emissions reduction targets, governance, and other climate change policies. LGIM asked for detailed transition plans from these companies outlining how they plan to improve in these areas, and in 2021 it called for all companies to give shareholders the right to vote on these plans. LGIM votes against energy transition plans it finds to be insufficiently robust, including the one proposed by the energy sector heavyweight Shell*.
Biodiversity
Global wildlife populations have declined by nearly 70% in the last 50 years, and this biodiversity loss is a threat to both the environment and humanity as a whole, causing a range of problems from flooding and food shortages to the spread of new diseases. It’s a big problem for investors, too – more than half the world’s total GDP is either moderately or heavily dependent on nature.
Although LGIM has included anti-deforestation in its investment stewardship activities since 2016, it recognised that more needed to be done to address biodiversity loss as a whole. That’s why, in 2021, LGIM launched its biodiversity policy, which marked the first step in formalising its commitment to biodiversity. The policy will help LGIM to develop its capacity to assess biodiversity risks and opportunities.
Diversity
It’s our belief that diversity of experience in business is crucial in building a better society. LGIM backed up this belief with action in 2021, opposing the election of 370 company directors globally due to concerns about board diversity.
This work built upon its diversity engagement campaign in 2020, which focused on FTSE 100 and S&P 500 companies that lacked ethnic diversity at board level. Of the 79 companies LGIM engaged with in 2020, 50 had added at least one ethnically diverse director by March this year.
Health
After two years of disruption wrought by COVID-19, public health is high on the agenda around the world. According to the World Health Organisation, one of the biggest threats to public health facing humanity is antimicrobial resistance – when disease-causing bacteria and viruses become resistant to treatment through the overuse and misuse of medicines such as antibiotics.
In 2021, LGIM joined the UN General Assembly’s call to action on this issue, as well as writing to G7[1] finance ministers explaining why antimicrobial resistance is not just a public health risk, but a financial stability risk too. It also encouraged McDonalds, one of the world’s biggest buyers of beef, to report on its antibiotics and public health costs.
To find out more about LGIM’s investment stewardship work, read the full Active Ownership report on our website.
All figures are sourced from LGIM’s Active Ownership report, April 2022.
Key risk
The value of an investment and any income taken from it is not guaranteed and can go down as well as up; you may not get back the amount you originally invested.
*For illustrative purposes only. Reference to a particular security is on a historic basis and does not mean that the security is currently held or will be held within an LGIM portfolio. The above information does not constitute a recommendation to buy or sell any security.
[1] The G7 is a political forum made up of Canada, France, Germany, Italy, Japan, the UK and US.