2023 Net Zero Stewardship Programme Report

As the science of climate change continues to evolve, its financial consequences are also being recognised and addressed.

Royal London Asset Management has a long history of integrating environmental factors including climate change into investment processes. In 2021, we took this a step further, making our formal net zero commitment to reduce emissions in our in-scope investments by 50% by 2030 and then achieving net zero by 2050 [1]. This is a challenging target, and to support it, we have developed and implemented our own proprietary Climate Transition Assessment. This gives us a consistent framework to look at the companies we invest in and identify the areas where we can engage constructively.

A global phenomenon requires a global response from governments, investors and companies. Engagement is one of the key levers we use to support our firms purpose of ‘Protecting today, investing in tomorrow. Together we are mutually responsible’. This means that rather than simply selling every energy company we own to improve our metrics, we chose to engage with those companies to seek improvements in transition planning and action.

This, our second annual report, covers our objectives, actions and outcomes in 2023. We focused our efforts on the highest emitting companies across our assets under management – generally companies in areas such as mining, oil producers and utilities. In this way, we aimed to maximise the benefit from our stewardship activities.

Source: Royal London Asset Management, Scope 1, 2 and 3 financed emissions from Royal London Asset Management’s AUM as of June 2023, indicators from companies’ Climate Transition Assessment from 2022 and 2023.

The outcome in the last reporting period has been mixed. Some of the companies we engaged with in 2022 showed signs of progress during our 2023 assessment; improving in areas such as investment in climate solutions, executive remuneration and offsetting disclosures. The news however was not all good; we found other companies and governments have slowed or stalled in their progress in support of the net zero goals– this is making it challenging to take decisive climate action.

However, while change can be supported by the governments and companies we engage with, it can also come from us – both as part of the wider financial services industry but also as Royal London Asset Management and the broader Royal London Group.

Against this backdrop, we will continue to focus our efforts on the highest emitters in 2024. We believe that in 2024 and into 2025, there are three key trends to watch:

1. The likelihood of a disorderly transition due to regional and global geopolitical tensions
2. The pressure of increasingly volatile weather events and climate adaptation; and

3. The increasing information available to investors due to regulations, disclosures and standards.

Through all of this, transparency remains a key element in our work, partly through this report, but also ongoing updates through specific net zero articles, blog posts and research, and wider responsible investment communications. This ensures that our clients know what we are doing on their behalf and can input into those processes.

We are investing in resources to support and build out our work in this area and will continue strengthening partnerships with other asset managers and stakeholders – using our collective access and influence in a positive way.

Read in full: 2023 Net Zero Stewardship Programme Report

[1] See our commitments on page 5.

[2] This refers to engagement carried out using our 12 net zero indicators as opposed to general climate engagement done individually or in collaboration with others.