Scientists recently found that if all the pledges made at COP26 in 2021 are kept, the world may hit its crucial target of keeping global warming below 2°C. However, there’s a big difference between pledges and implementation – there’s still a huge amount of work to be done, and companies like Legal & General have a big role to play just as countries and politicians do.
In March, we published our climate report for 2021, in line with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD). The TCFD was established in 2015 by the Financial Stability Board and its then-chair, Mark Carney, who was also Governor of the Bank of England at that time.
In 2017, the task force produced a framework to help companies publish annual reports publicly detailing their exposure to risks associated with climate change, as well as any opportunities it might create.
On 6 April this year, the UK became the first G20 country to make it mandatory for large companies – those with more than 500 employees and more than £500m in annual turnover – to disclose climate-related financial information. At Legal & General, we published our first climate report in 2018, and have done so every year since.
Our approach to climate change is built on three strategic pillars: how we invest our assets, how we use our scale to influence, and how our businesses operate. In 2021, we made progress in all three areas.
We reduced the greenhouse gases associated with our investment portfolio by 17%1, as well as tightening our exclusion policies for high-carbon investments. To date, we’ve invested £1.4bn in renewable energy.
In 2021, we started construction on Millfield Green, our first retirement community enabled to operate at net zero carbon emissions. The development will use a number of on-site renewable energy sources, including solar panels, electric vehicle charging points, and ground source heat pumps made by Kensa, a company we invested in in 2020. This on-site technology will protect residents from external energy suppliers’ rising prices.
CALA, our largest housebuilding business, committed to achieve industry-standard 2030 targets for embodied carbon in all new homes by 2025 – five years early – having already achieved this target in Scotland, where it was founded.
In December, we invested £3.5m in Sero Technologies, a company supporting the transition to net zero across the residential housing sector. Sero is developing a digital tool that works with different stakeholders in the sector to plot a pathway to net zero.
Through our Climate Impact Pledge, we analyse companies against key sustainability indicators and give them a transparent score that helps to drive change.
In 2021, we rated 1,000 companies. If a business falls short of our standards for sustainable companies, we divest from them: companies including MetLife, KEPCO and ExxonMobil are all on our exclusion list, while the food retailer Kroger and car manufacturer Subaru have both been reinstated after improving their practices.
We also reduced our own operational footprint by 3%, as well as commissioning external assessments to determine what’s needed for our core occupied offices to achieve net zero emissions. We also relaunched our business travel policy with a renewed focus on sustainability.
Over the next year, we’ll continue the process of setting and validating science-based targets (SBTs), which will help us further reduce our carbon footprint. SBTs are targets in line with what the most up-to-date climate science considers necessary to achieve the goals of the Paris Agreement. We plan to set our targets by the end of this year, and publish them in early 2023.
1 Our 2021 portfolio GHG emission intensity will have included a material reduction due to temporary Covid-19 impacts which we expect to at least partially unwind during 2022