Climate concerns triggers LGIM’s divestment from AIG, Commercial Bank of China

Legal & General Investment Management, the UK’s largest asset manager, has pulled investment from insurance company AIG and three other firms over their failure to respond to climate concerns.

The £1.3tn fund manager said it has divested from AIG, Industrial and Commercial Bank of China, PPL Corporation and China Mengniu Dairy for “unsatisfactory responses to engagement and/or breaches of ‘red lines’ around coal involvement, carbon disclosures or deforestation”.

The four companies join a list of others from which LGIM has excluded investment, including China Construction Bank, MetLife, Japan Post, KEPCO, ExxonMobil, Rosneft, Sysco, Hormel and Loblaw.

An exclusion means they are not eligible for investment by LGIM’s Future World fund range, and all auto-enrolment default funds in L&G Workplace Pensions and the L&G MasterTrust, which manage about £58bn in assets.

READ LGIM to climate change laggards: Step up or face divestment

The asset manager said AIG and Industrial and Commercial Bank of China had no thermal coal policies in place, nor did they disclose Scope 3 emissions associated with investments. It added that PPL did not have a timeline to phase out coal power generation, while China Mengniu Dairy does not have a zero deforestation policy in place, nor was it disclosing agricultural Scope 3 emissions.

The asset manager said that US food retail Kroger, which was previously on its exclusion list, had recently been given the green light for investment “following improvements in its deforestation policies and disclosure, as well as efforts to promote plant-based products which have a lower climate impact”.

Yasmine Svan, senior sustainability analyst at LGIM, said: “Improvements in data and analytics have allowed us to increase our coverage and to enforce what we consider to be minimum standards with regards to climate risk management, through expanded voting sanctions, supplemented by our in-depth engagement with pivotal sectors.

READ Where’s the sense in excluding climate change data from a company’s accounts?

“At the same time, as investors step up their scrutiny of companies, so too are companies raising their ambitions. We are pleased to be able to add to the number of companies reinstated in our funds following progress and will continue our engagement and collaboration to help increase overall standards across markets.”

LGIM’s divestment from the four companies comes after it announced a programme last year of deeper engagement with 58 companies that are influential in their sectors but are yet to embrace the transition to net-zero carbon emissions.

LGIM said almost three quarters have already responded to engagement, with 13 of the 58 companies now having a net-zero target in place.

Last year LGIM also announced it would use a series of metrics and its own climate modelling to produce a traffic-light system for more than a thousand companies, and make this information available on its website.

To contact the author of this story with feedback or news, email David Ricketts

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