We invest responsibly for your employees
This can help us to:
- manage financial risks that could affect your employees' pension and ISA savings
- grow their money over the long term
- play our part in positively shaping the future.
We invest responsibly in line with Our Purpose: ‘Protecting today, investing in tomorrow. Together we are mutually responsible.’
Our approach to responsible investment
Our balanced approach to responsible investment prioritises employees' financial outcomes, while considering the future they'll live in.
What we do
As a large, active investor, we use a ‘toolkit’ of approaches to aim to manage financial risks and uncover opportunities, adapt quickly to change and influence positive action. The investment approaches we choose to use will vary depending on where your employees are invested.
We also apply our group-wide policies and positions to our investments. These include our climate commitments, such as net zero goals, exclusions and approach to fossil fuels.
What we don't do
We don’t immediately withdraw investment from (exclude) a company if it fails to meet our environmental, social and governance (ESG) preferences. For example, if we have concerns about the credibility of a company’s strategy to reduce carbon emissions.
Our starting point is to engage with the company so we can better understand and influence how it operates. By doing that, we can prioritise your employees’ financial interests and aim to play our part in moving fairly to a sustainable world.
However, if a company isn’t making tangible progress – and this could have a negative impact on your employees' pension and ISA savings – we’ll take necessary action, which may include exclusion.
How we invest responsibly
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How you can invest responsibly with us
We embed responsible investment in our ready-made investment options at no extra cost to your employees. This includes our range of default investment options. These are designed to help you feel confident that you're meeting your employees' pension needs, as well as your obligations as an employer.
Your employees can also choose from our range of sustainable funds. These focus on investing in companies that contribute positively to the environment and society.
Remember that the value of investments can go down as well as up, and your employees may get back less than they paid in.
Ready-made investment options
Our Governed Range provides ready-made investment options to support employees' pension and ISA savings. It includes default investment options, other lifestyle strategies and standalone Governed Portfolios - all incorporating our responsible investment approach.
A range of sustainable funds
Our sustainable funds focus on investing in companies that contribute positively to the environment and society.
What is responsible investment?
At Royal London, responsible investment means we consider environmental, social and governance (ESG) issues in deciding:
- where we invest
- the investment funds and solutions we develop
- where we actively use our influence to support progress.
We believe that doing this is in your employees’ best interests to help manage risk and deliver value to them over the long term.
At Royal London, responsible investing isn’t the same as sustainable investing. Sustainable investing is a strategy that intentionally invests in companies or assets that contribute towards positive environmental and/or social outcomes. It also typically avoids investments in a wider range of industries and companies. We offer sustainable funds for employees looking for this approach.
Why invest responsibly?
Most of your employees’ pension investments are held in companies. How these companies perform can affect the value of your employees’ investments.
Poor management of ESG issues – such as impacts from and on the environment, or failing to support staff welfare – can create financial risks for a company. On the flip side, in some cases, a company considering environmental and other societal issues in its plans may be better placed to improve resilience and efficiency, increase market share and deliver returns.
This is why we look at ESG issues when managing your employees’ pension investments, alongside other areas that can affect performance. And it’s part of the reason we use our influence to encourage companies to improve their management of ESG issues.
But that’s not all. Investing responsibly, encouraging companies to better manage ESG challenges and influencing policymakers can help us play our part in moving fairly to a sustainable world.
What are examples of ESG considerations?
Environmental
The impact environmental challenges, like climate change and the transition to net zero (balancing the amount of greenhouse gases emitted into the atmosphere and the amount removed from it), could have on a company’s ability to operate.
For example, companies could be at financial risk if consumer demand moves to low-carbon options, or if changes in weather patterns affect availability of raw materials it relies on. On the other hand, by coming up with environmental solutions, a company could experience stronger growth.
Social
How a company treats its employees, suppliers and the communities in which it operates and the resulting risks or positive impacts on its business. Human rights, health and safety, working conditions and diversity, equity (fairness) and inclusion.
Governance
How a company is run. Its measures to prevent fraud, bribery and corruption, how it approaches executive pay and the diversity of its board.
Where can I find out about your approach to stewardship?
You can find out about our approach to stewardship, key activities and progress in our Stewardship report. You can also read our engagement and voting case studies.