Praises companies taking positive action and removes laggards from the Future World Funds
LGIM introduced the Climate Impact Pledge in November 2016, focused on accelerating the progress companies are making in addressing climate change and transitioning to a low-carbon economy. LGIM has initially focused on engaging with 84 of the world’s largest companies across different sectors and geographies identified as pivotal in meeting the 2°C target set in the Paris Agreement.
These companies have since been assessed, scored and ranked against more than 50 indicators, including whether they have a corporate statement that formally recognises the impact of climate change, whether they are fully transparent on their carbon contribution and whether the board composition is diverse and robust enough to drive innovation and change.
Driving results through engagement
LGIM’s first engagement period ran from April 2017 to April 2018. Almost three quarters (74%) of the 84 companies responded to letters from LGIM, resulting in meetings with 61% of the companies. We believe these conversations contributed to a number of positive moves by firms, including Toyota, Wells Fargo and Australia’s Commonwealth Bank.
Since LGIM began the engagement process in April 2017, climate scores for US companies have improved, with median Japanese, Australian and South Korean companies also improving. In contrast, median French, UK and German companies have not.
The rankings have also revealed contrasting approaches by sector, with utility companies both some of the best and worst performers. Oil and gas companies, utilities and auto-manufacturers saw overall improvements in their scores over the engagement period.
Leading the charge
LGIM’s assessment also revealed those companies that are making significant progress and leading initiatives to address climate risk. These include:
A leader in public policy: Spanish utility Iberdrola, one of the largest electricity companies in the world, has called for ambitious EU emissions reductions and has lobbied for the EU to raise its carbon price (a reform that is now underway).
A leader in business strategy: Oil and gas major Total has stated that it will put a climate-compliant 2°C scenario at the centre of its strategy. Having already made significant investments in clean energy and battery manufacturers, the company will increase its focus on renewables and natural gas.
A leader in transparency: The biggest listed bank in France, BNP Paribas, discloses the carbon content of the power plants it finances. It also plans to reduce this in line with the global averages needed to reach the 2°C objective. The company has also recently announced that it will no longer finance the development of ‘extreme’ fossil fuels (coal, tar sands).
A leader in its statement on climate change: The multinational food and drink company Nestlé has set targets to reduce greenhouse gas emissions by 2020, in line with the Paris Agreement. The company discloses these 2020 targets and how it is performing against them.
Taking action against laggards
As part of the pledge, LGIM committed to vote against companies that have shown persistent inaction to address climate risk and divest its Future World range from these companies. As at the start of June, the Future World funds did not hold the following companies:
China Construction Bank
Rosneft Oil
Japan Post Holdings
Occidental Petroleum
Dominion Energy
Subaru
Loblaw
Sysco Corporation
LGIM will also vote against the re-election of the chair at these companies across LGIM’s complete range of equity funds.
Meryam Omi, Head of Sustainability and Responsible Investment Strategy at LGIM said: Climate change is a significant issue for society and investors... Our role is to ensure companies in different industries transition successfully, and are committed to helping them do that with our Climate Impact Pledge.
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