The 'E' in ESG
Climate change and nature loss carry risks to investments.
Extreme weather events like floods and fires can affect companies’ profits. High-polluting energy industries are facing increasing competition from cleaner, cheaper energy sources. Delivering on climate goals also means addressing emissions from forestry, agriculture and other change in land use.
Closely connected to climate change is nature loss. A changing climate threatens natural ecosystems, and nature loss amplifies climate change by reducing the ability of ecosystems to store carbon. We believe the global impact of nature loss (for example deforestation) on the markets and companies in which our members are invested is financially significant.
Playing our part to create positive change
Seeking to lower pension funds’ carbon footprint
To address global warming, the international climate change treaty, the Paris Climate Agreement, aims to limit and hold the world’s average temperature rise to well-below 2°C (ideally 1.5°C) by the year 2100.
To help achieve the Paris Agreement, globally we need to achieve net zero carbon emissions by 2050. Net zero means cutting carbon dioxide (one of the key greenhouse gases) to as close to zero as possible, with remaining emissions re-absorbed or removed from the atmosphere, by oceans, forests or carbon capture technology for instance. At the same time, it also requires deep reductions in other greenhouse gases, particularly methane.
In support of this global goal, the following funds within the pension range aim to lower carbon (decarbonisation) towards an end goal of net zero by 2050 (unless otherwise stated).
- Diversified Fund (L&G PMC fund)
- Dynamic Diversified Fund
- Future World Multi-Asset Fund
- Multi-Asset Fund
- Retirement Income Multi-Asset Fund
- Sustainable Property Fund (end goal of net zero by 2030)
- Target Date Funds
View each fund’s progress and target details until 2030
Some funds may incorporate sustainability or ESG considerations into their investment strategy but have not set a net zero goal (as of March 2024).
Climate Impact Pledge
Within selected funds, LGIM runs a climate engagement programme (LGIM Climate Impact Pledge) where it assesses approximately 5,000 companies worldwide across 20 climate-critical sectors (data as at May 2023). The companies included are responsible for more than half of the greenhouse gas emissions from the world’s largest listed companies.
Companies are assessed on their climate commitments and efforts to limit carbon emissions, one of the key greenhouse gases, to net zero by 2050. In 2023, LGIM identified over 300 companies for voting sanctions (voting against a company matter, activity or policy) due to not meeting the Climate Impact Pledge minimum standards.
Read the Climate Impact Pledge report to learn more, including the pension funds it is applicable to.
In 2023, LGIM also:
- Updated its Deforestation Policy and engaged with over 160 companies on the topic. This was the first year LGIM applied specific deforestation vote sanctions.
- Was involved in multiple engagements with the UK’s key water companies, their major shareholders and industry regulators.
- Structured its approach to nature engagement across four key sub-themes*: natural capital management; deforestation; the circular economy; and water, with a highlight on agriculture.
*These themes are focused on addressing the five direct drivers of nature loss, as identified by the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES). The IPBES’ direct drivers are climate change; land, freshwater, ocean-use change; natural resource use; pollution; and invasive alien species. The IPBES is an independent intergovernmental body established by United Nations member states to strengthen the science-policy interface for biodiversity and ecosystem services for the conservation and sustainable use of biodiversity, long-term human well-being and sustainable development. It was established 21 April 2012 by 94 governments (source: About | IPBES secretariat).
Read the Active Ownership report for more details on LGIM’s engagement and voting activities.
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The value of your pension savings can go down as well as up and is not guaranteed.
Most of the activity described on this site is carried out by Legal & General Investment Management (LGIM), a division of Legal & General. LGIM manages your funds and makes the day-to-day investment decisions.
All our funds are managed by professional fund managers but some of the funds available to you are not managed by Legal & General. External fund managers may take a different approach to responsible investing.
Throughout this site, we use companies as examples of the action we take. The issues highlighted are not exclusive to them.
Reference to a particular security is on a historic basis and does not mean that the security is currently held or will be held within an LGIM portfolio. The information on this site does not constitute a recommendation to buy or sell any security.