Asset manager Legal and General identifies companies not meeting their own climate standards

Global asset manager Legal and General Investment Management (LGIM) has identified close to 300 global companies which are not meeting the minimum standards set by the companies themselves to address climate risk as part of its annual assessment of businesses in climate-critical sectors.

LGIM’s annual climate impact pledge scrutinises the climate transition plans of companies, encourages them to tackle climate change and transition to net-zero carbon emissions, and holds those not making the minimum standards accountable through voting and investment sanctions.

LGIM also applies its own climate standards to the companies it scrutinises. A company that fails to meet its own standards and those set by LGIM is then put on LGIM’s investment exclusion list

The UK-based asset manager has announced updates to its investment exclusion list, which now includes 14 companies that failed to meet LGIM’s minimum redline standards for climate action. Those on the list are excluded from selected funds with £158 billion (€184bn) in assets

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The list includes several companies with Irish operations, including US finance and insurance multinational AIG, US food conglomerate Sysco, and US insurance firm MetLife.

This year’s pledge was expanded to assess more than 5,000 companies across 20 “climate critical” sectors, a significant increase from around 1,000 companies across 15 sectors assessed last year.

LGIM identified 299 companies that qualify for voting sanctions by LGIM at their annual general meetings for not meeting their own minimum standards to address climate risk.

The pledge conducted more targeted engagement with 105 larger “dial mover” companies that have the potential to galvanise action on climate in their sectors.

As a result, LGIM has said it will apply voting sanctions against 43 of these companies, including those companies on the 14-strong investment exclusion list.

Commenting on this year’s climate impact pledge, Michael Marks, head of investment stewardship at Legal & General Investment Management, said that as the window for achieving a 1.5C limit to global warming narrows, “the need for greater action by companies has become increasingly urgent”.

LGIM’s chief executive officer, Michelle Scrimgeour, said the investment company is signalling clearly to investee companies the actions they are expected to take. “We believe policymakers, investors and industry leaders must use every legitimate tool at their disposal in order to mitigate the systemic risk posed by climate change . . . Initiatives like our pledge play a key role in this activity and demonstrate how we seek to fulfil our purpose to create a better future through responsible investing.”

LGIM noted that over a third of companies in the oil and gas sector failed to meet its minimum standards and most “did not have sufficiently ambitious emissions targets”.

The banking, insurance and property sectors were also identified as falling behind when it comes to setting and meeting net-zero targets.