How we integrate ESG into investments

We know that people care about making more responsible choices, which is why environmental, social and governance (ESG) factors are included in the investment decisions we make.

Issues such as corporate governance (the way a company is run), human rights and climate change are more important than ever, and we believe these and other factors should be taken into account when deciding where to invest a customer’s money.

As part of our commitment to being a responsible investor, we ask our asset managers to integrate ESG across all investment choices, not just a select few.

We define ‘ESG Integration’ as the explicit inclusion of ESG in the decision-making process, which means they should understand how these factors could impact the future performance of our investments and be able to explain it.

Why is this important?

We believe that by understanding how E, S and G factors may impact investments, we can make better choices when it comes to investing, which could mean better outcomes for your employees.

Integrating ESG factors not only helps us with the decisions we make, but it also helps us build better relationships with the companies we invest in. If we have a deeper understanding of how companies are run as well as how they make choices, we can highlight any areas for improvement and engage with them to influence this positive change.

How does ESG integration work?

Do default workplace pension schemes benefit from ESG?

Yes. We're committed to having ESG factors integrated across all our investment solutions, not just a specialist few.

Asset managers look at a wide range of information when deciding if it’s a good choice to invest in a company, including ESG data.

ESG data contains information about a publicly traded company’s environmental, social and governance practices, and uses this information to create an ESG score (sometimes called a rating).

This data can be compiled by a team of ESG analysts or through artificial intelligence (AI), or a mix of both. Using information from things such as annual reports, news sources, and stock exchange filings, a data provider will give a company an ESG score; the better the score, the stronger the investment opportunity from an ESG perspective.

We ask all our asset managers to include ESG data when making investment decisions. What’s more, our asset managers at Royal London Asset Management (RLAM) are supported by a specialist Responsible Investment team who provide further insights and analysis to ESG scores.

This is to help us make the best possible choices to contribute to a better future for society, and of course, aim to generate the best possible returns for our customers.