Our responsible investment approach
We believe this is key to protecting the standard of living for this and future generations. And it’s also why we’re aiming to cut our carbon footprint across our investment portfolios in half by 2030 and achieving net zero by 2050.
Find out more on how your employees’ investments are making a difference to the world.
Harnessing the power of your workplace pension
By focusing on four key areas, we can make sure that money is not only being invested responsibly – but we can actively influence the transition to a more sustainable world.
Stewardship and voting
We ask our asset managers to vote on our behalf to reflect our voting principles.
Advocacy and engagement
We use our position as a shareholder to positively influence the behaviour of the companies we invest in.
ESG integration
We integrate environmental, social and governance factors into our investment decision making processes.
Investment solutions
We focus on delivering high-quality investment solutions for your employees, with a responsible investment approach built in as standard.
Our active management approach
To help us achieve our long-term climate goals, our default investment solutions focus on a wide range of Environmental, Social and Governance (ESG) factors.
Our passive equity funds are one of the key building blocks of our default investments – but we use ‘tilts’ to help us take a much more active approach in how we manage them. Our ‘tilts’ enable us to reduce our exposure to the largest carbon emitters and increase our exposure to the lowest carbon emitters.
We’re able to do this without changing the established risk profile of our default investment solutions, or increasing our charges. So you can be confident that your workplace pension will continue to provide value for money, while giving your employees confidence that they’re helping to tackle climate change.
In addition to carbon reduction, our active management approach also gives us the flexibility to adjust our exposure to companies with poor social practices or corporate governance issues.
Engaging for positive change
To protect the environment our customers will retire into, we use our position as a shareholder to positively influence the behaviour of the companies we invest in through active engagement and exercising our voting rights.
Responsible investment – how we look at the bigger picture
At Royal London we are committed to being a Responsible Investor.
Our aim is to generate good returns, while also making a positive contribution to our society and environment. It’s about looking at the bigger picture. And taking into account Environmental, Social and Governance factors, or ‘ESG’ for short.
And by putting ESG issues at the heart of our investment decisions, we can be a force for good.
Because what companies do with your money can make a big difference to the future of the world. For example, we might look at a company’s position on environmental responsibility, cyber security, or boardroom diversity.
Climate change is at the top of a big list of global problems, and as part of our commitment we’ve pledged to half the carbon emissions of our investments by 2030, and achieve Net Zero by 2050.
Working towards that goal, we’re now investing less in companies with the highest carbon emissions, and investing more in those with the lowest. We believe this change will reduce the carbon intensity of our investments without significantly impacting the risk to you, and at no extra cost to you.
To us, Responsible Investing isn’t about choosing values over value - it’s about managing risk, making better investment decisions, which aim to generate better long-term results for our customers.
How we practice Responsible Investment
We believe our asset managers are best placed to understand the importance and impact of ESG factors across our investments in order to help improve customer outcomes.
Our role is to pick the best asset managers and set out our investment strategy. We believe deciding not only how we invest but who we choose to work with puts us in the best position to do what’s right for our customers.
Responsible selection
Before we appoint an asset manager, we’ll carry out a responsible investment assessment at the screening stage to make sure they meet the best practice standards we have in place.
Appointment
We’ll make sure all our Responsible Investment principles are known to all our asset managers, and we’ll only choose to work with the ones who are already working on putting these principles into practice
Monitoring and reporting
We’ll ask asset managers to provide regular updates and reports on their progress. If we find they’re not reaching the standards we expect, we may decide to stop working with them.
Shareholder Rights Directive II (SRD II)
Around a third of our customer's pension savings is invested in the shares of listed companies (equity investments). The proportion of equity held in each investment strategy depends on the product. Our with profits products provides additional guarantees and smoothing, more detail on these products and their investment strategy can be found in the Principles and Practices of Financial Management.
We’re committed to being a responsible investor. This means that good stewardship is hugely important to us, as is choosing the right asset managers to make investment decisions on our behalf. You can find out more in our Responsible Investment policy and our Stewardship and Engagement policy. We work with our primary asset manager Royal London Asset Management (RLAM) to exercise our stewardship responsibilities. Read more about RLAM’s approach to Responsible Investment.
We exclude cluster munitions, anti-personnel landmines, and biological and chemical weapons based on guidance from the following international conventions and treaties:
- The Biological Weapons Convention 1975, prohibits the development, production and stockpiling of bacteriological (biological) and toxin weapons
- The Anti-Personnel Mines Treaty 1997, also known as the Ottawa Convention, prohibits the use, stockpiling, production and transfer of anti-personnel mines
- The Chemical Weapons Convention 1997, prohibits the development, production, stockpiling and use of chemical weapons
- The Convention on Cluster Munitions 2008, prohibits the use, production, transfer and stockpiling of cluster munitions
No fund will knowingly invest in corporate equity and/or debt involved in the manufacture cluster munitions, anti-personnel landmines, or biological and chemical weapons.
What this means for your employees
Ultimately, responsible investing is not about choosing values over value, but how we can integrate both to deliver long-term investment returns. Remember prices can fall as well as rise meaning your employees may not get back the full amount of capital originally invested.
By combining the skills of our asset managers and considering the ESG impacts of all our investments, we aim to provide better outcomes for our customers and your employees while working towards making businesses, society and the environment stronger for the future.
We’ll provide updates on our responsible investment activity in our Annual Report, and we’ll update our website with news on an ongoing basis.