No policy, no transition: Why investors must engage

In an era defined by geopolitical complexity and evolving economic priorities, the direction of government policy can be both volatile and changeable. For long-term investors seeking to manage systemic environmental risks, policy is far more than background noise; it defines the very rules of the markets in which we invest. The choices made today will play a significant role in shaping whether the coming decade delivers a credible, investable transition for both climate and nature.

We view policy engagement not as an add-on or a reputational exercise, but as a fundamental lever of systemic stewardship. It is a practical tool used to create the enabling conditions companies require to transition toward a low-carbon, nature-positive economy. From the competitiveness of low-carbon technologies to the resilience of infrastructure and the quality of sustainability reporting, policy shapes the landscape of risk and reward.

We view policy engagement not as an add-on or a reputational exercise, but as a fundamental lever of systemic stewardship.

Our advocacy approach, refined over several years, is designed to support our stewardship objectives by contributing to a more predictable and investable policy environment. While our primary focus remains on the UK and Europe, we engage globally to address policy barriers that hinder the progress of our investee companies.

How we engage with policymakers

We engage with policymakers and regulators in a range of ways. This includes responding to formal consultations, contributing to joint statements and sign-on letters, engaging in direct dialogue, and convening or participating in targeted policy discussions. Our advocacy is grounded in our experience as long-term investors and in insights from company engagement – what we repeatedly see on the ground as obstacles to progress, and what practical policy changes would help address them. We engage with policymakers as Royal London Asset Management and, where it adds weight and consistency, we also work alongside the wider Royal London Group to amplify our voice.

Across climate transition, adaptation and nature, we are guided by a clear investor perspective on what effective policy looks like in practice.

Across climate transition, adaptation and nature, we are guided by a clear investor perspective on what effective policy looks like in practice. We advocate for policy that is credible and accountable, with clear targets, robust measurement and effective oversight. We focus on policy that supports investment, providing stable signals, predictable frameworks and effective incentives that can unlock capital at scale. We are attentive to competitiveness, seeking to avoid unintended consequences for trade-exposed sectors, and we emphasise pragmatic, decision-useful reporting that avoids unnecessary burden while improving market transparency and reducing uncertainty for investors.

What good climate policy looks like

We believe effective climate policy is best underpinned by credible, predictable and accountable frameworks that reduce uncertainty and enable efficient long-term capital allocation. This includes clear long-term objectives (such as net zero) supported by interim milestones, transparent progress reporting, and independent oversight to monitor delivery.

We also see a role for market-based mechanisms and well-designed, time-bound incentives that reduce emissions without undermining competitiveness or security of energy supply. This includes:

• Predictable carbon pricing trajectories across major emitting sectors
• Removing policies and incentives that artificially favour higher-emitting activities
• Targeted and temporary incentives to address genuine market failures (e.g. early-stage deployment infrastructure, and innovation spillovers)
• Public procurement that is performance-based and technology-neutral to help create demand for lower-emissions solutions

Credible sector-level transition planning is essential. This includes clear, investable roadmaps for key sectors such as energy, industry, transport, buildings and agriculture, alongside defined timelines for fossil fuel phase-down. Just transition considerations should be embedded throughout, with safeguards for emissions intensive, trade-exposed sectors, measures to protect workers and communities affected by structural changes, and meaningful engagement with stakeholders to maintain public and political support.

What good nature policy looks like

Alongside climate, nature is increasingly recognised as a material theme among investors, as biodiversity loss creates systemic risks that can undermine economic stability. The latest assessments from the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) [1] highlight the scale of the challenge and the role of a small number of high-impact sectors – notably agriculture, energy and infrastructure. Addressing these risks requires coordinated ambition from governments, businesses and wider society, rather than isolated interventions.

Alongside climate, nature is increasingly recognised as a material theme among investors, as biodiversity loss creates systemic risks that can undermine economic stability.

We therefore support decision‑useful disclosure requirements that ensure high‑integrity, proportionate reporting from companies with the most significant impacts or dependencies. These should be aligned with frameworks such as Taskforce on Nature-related Financial Disclosures (TNFD) [2] and supported by consistent metrics that improve comparability and accountability. But information alone is not enough. We support embedding a clear “prevent harm first” approach in policy, where companies are expected to avoid and minimise impacts before turning to restoration, and use offsets only where appropriate (also known as the mitigation hierarchy). Where nature credits or offsets are used, robust rules and guardrails are essential to prevent poor‑quality claims and ensure outcomes are real, additional and durable. Finally, effective nature policy must respect the rights and governance of Indigenous Peoples and local communities by ensuring meaningful participation and protections in high‑impact landscapes and supply chains.

Why investor engagement matters: better policy, lower risk

As governments grapple with delivering climate and nature goals alongside economic resilience and affordability, investors can contribute a practical perspective on what policy settings will unlock real economy delivery. We have seen, through company engagement, where ambition is being held back by gaps in rules, incentives and infrastructure.

For investors, the focus is not advocacy for its own sake, but using that evidence to help shape more credible, investable policy, which in turn reduces risk, improves predictability and accelerates the pace of transition. Across climate and nature, the common thread is the need for policy frameworks that are credible, coherent and accountable, translating long-term objectives into clear milestones, transparent reporting and effective oversight.

As governments grapple with delivering climate and nature goals alongside economic resilience and affordability, investors can contribute a practical perspective on what policy settings will unlock real economy delivery.

We encourage peers across the investment chain to ground policy debates in real‑world evidence - sharing what company engagement tells us about delivery challenges, and speaking collectively where it can lead to clearer, more effective rules and frameworks. Done well, this helps shift policy from aspiration to execution and supports more investable outcomes for clients over the long term.

1. IPBES (Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services) is a global, government backed body that synthesises evidence on biodiversity for decisionmakers. Its 2026 Business and Biodiversity Assessment summarises how business both depends on and impacts nature.
2. TNFD (the Taskforce on Nature-related Financial Disclosures) is a framework designed to help business and finance assess and disclose their nature‑related dependencies, impacts, risks and opportunities, so nature is integrated into decision‑making

Royal London Asset Management engages with companies as part of its responsible investment and stewardship strategy, aiming to drive long-term value for clients while promoting sustainable business practices. 

Our voting, engagement and advocacy activities are designed to be pragmatic, informed by research, evolving market insights and local best practice, and aligned with the long-term interests of our clients. These activities aim to enhance the value and integrity of our investment decisions. 

Please note that voting and engagement practices may not apply uniformly across all Royal London Asset Management funds or strategies, as each has distinct investment objectives. Please refer to the investment documents for specific details. 

For professional investors only. This material is not suitable for a retail audience. Capital at risk. This is a financial promotion and is not investment advice. Past performance is not a guide to future performance.

The value of investments and any income from them may go down as well as up and is not guaranteed. Investors may not get back the amount invested. The views expressed are those of the author at the date of publication unless otherwise indicated, which are subject to change. Forward looking statements are subject to certain risks and uncertainties. Actual outcomes may be materially different from those expressed or implied.