CO2 emissions, superfires, floods, droughts, global warming… The British manager Legal & General Investment Managers (IM), the largest in the country with 1.4 trillion euros in assets under management, has extended the vote to 299 companies of punishment on policies related to the environment in the shareholders’ meetings that are being held in 2023, as revealed in its annual report on commitment to climate change.
As the time to limit global warming to 1.5 degrees by 2050 shrinks, LGIM has expanded the scope of the Climate Impact Pledge this year, holding more companies accountable than ever before through sanctions votes (standing against CEOs in shareholders meetings) or, directly, taking advantage of the shares of those companies that do not comply or vetoing those of their spectrum of potential investments.
Legal & General says that this year it is evaluating more than 5,000 companies from 20 climate-critical sectors, which represents a quantum leap of five times compared to the 1,000 companies they tracked last year. The manager points out that she has been involved in conversations and a more direct surveillance of 105 companies, 75% more than the 60 in 2022, which she considers catalysts and promoters of emission neutrality in their respective sectors. Of these, the firm indicates that it has applied votes other than punishment in 43 companies.
Of this, the Legal & General blacklist includes 12 multinationals that are classified as non-investible. They are the insurers AIG and Metlife, the Canadian supermarket group Loblaw, the Korean electricity company Kepco, the US energy company PPL or the real estate platform Invitation Homes, the wholesale provider for hospitality Sysco, the food company Hormel and the oil company Exxon Mobil. In Asia, LGIM denounces banks China Construction (CCB) and Industrial Commercial Bank of China (ICBC), as well as cement company China Resources Cement.
LGIM has also announced two other divestments of companies that do not meet its climate standards: Air China and Cosco Shipping Holdings, bringing the total number of companies on LGIM’s divestment list to 14. It also has moves on the another direction, with the reincorporation of China Mengniu Dairy into its investments after a direct commitment to meet carbon targets by 2050 and other transparency issues that the British investment firm had claimed.
“There has never been a more important time to address the generational challenge of climate change. After a year of geopolitical and economic upheaval, global efforts to drive the energy transition are faltering.”
“There has never been a more important time to address the generational challenge of climate change. And yet, after a year of geopolitical and economic upheaval, global efforts to drive the energy transition are faltering. We believe that policymakers, investors and industry leaders must use all the legitimate tools at their disposal to mitigate the systemic risk posed by climate change,” explains Michelle Scrimgeour, CEO of Legal & General Investment Management, in a statement.
Beyond the movements in the portfolio of its funds, LGIM’s Climate Impact Commitment has a philosophy that has evolved since its launch in 2016. For example, the manager incorporates in 2023 “the risk on biodiversity and climate influence activity” as criteria when analyzing companies. For example, companies must demonstrate that they meet emissions targets with independent certificates. As a key aspect that touches the fiber.
By sectors, the LGIM annual report points to various business sectors as co-responsible for the climate situation, including fossil fuels and energy. Despite record profits in the oil and gas industry, more than a third of companies in the sector did not meet our minimum standards and most did not have sufficiently ambitious emissions targets.
In addition, the banking, insurance and real estate sectors have also been singled out for falling behind in setting and meeting ambitious zero carbon targets, according to LGIM. “These industries have the power to lead in reallocating capital and decoupling economic growth from carbon emissions,” they recall. The list of “critical for the climate” business sectors expands from 15 to 20 this year, including the paper industry, aluminum, glass or logistics, among others.
By country, the firm points out that Korean and Chinese companies have also experienced the most significant improvements” in their pro-climate policies, although it points out that the United Kingdom and France continue to be at the forefront in this matter, closely followed by Japan, which showed notable improvement between 2021 and 2023. “Although the United States has improved its average scores year-over-year, progress remains one of the slowest compared to other regions,” the report notes.