Our responsible investment approach
When your employees save into your workplace pension, we’ll work to fight the effects of climate change. We believe this is key to helping them achieve a good standard of living – both now and in later life. 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.
Harnessing the power of your workplace pension
We’re responsible for managing £148 billion of our customers' money. By focusing on four key areas, we’ll look to provide positive investment returns - while also helping society 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.
Responsible investment – how we look at the bigger picture
At Royal London we are committed to be a Responsible Investor.
And that means looking at the bigger picture.
It’s about looking at Environmental, Social and Governance factors, or ‘ESG’ for short.
For example, we might look at a company’s position on environmental responsibility, cyber security, or boardroom diversity.
As part of this commitment, we’re asking all our asset managers to consider financially material ESG risks and opportunities when they make investment decisions.
And to be good stewards by voting and engaging with companies to improve the way they’re run.
We fully expect all asset managers who we choose to work with to be putting these principles into place.
To us, Responsible Investing isn’t about choosing values over value - it’s about managing risk, making better investment decisions, and generating 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)
We invest £108bn* on behalf of our customers, of which around a third 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.
*as at 31 December 2020
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 and sale of 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.