RLAM'S landmark move away from £20bn passive investments to ESG and carbon tilted funds

Royal London Asset Management (RLAM) today publishes its Stewardship Report, which highlights new record level stewardship voting and responsible investment activities during 2021.

In 2021, RLAM successfully moved over £20bn of assets from passive index trackers into ESG tilted strategies (1) with a lower carbon intensity, in a move towards its net zero goal to reduce its carbon emissions from its investment portfolio to 50% by 2030.

Selecting companies with the right ESG credentials is not easy - RLAM recognised the need for a bespoke solution that incorporates ESG and climate-related investment criteria by introducing the ability to ‘tilt’ the funds towards or against these factors.

Now that ESG and carbon tilted funds no longer follow a third-party index which offers no control, this innovative process strengthens RLAM’s position as a responsible investor, whilst also giving a significant competitive advantage over other passive investments that track third party low carbon indices.

Other responsible investment highlights in 2021

Engagement and voting

The Responsible Investment team engaged directly with more companies than ever before in 2021, meeting with 221 companies via 368 interactions to effect positive change. The team voted more times than ever before, on a record high 44,452 resolutions at 3,765 meetings, in every world region. Topics of focus included climate, diversity, executive pay and more, from the boardrooms of global energy giants to those of supermarkets and retail fashion brands.
RLAM’s engagement spanned across six themes, including climate, governance, circular economy, innovation and technology and society, diversity, and social and financial inclusion. The engagement covered a range of objectives, such as the ‘Just Transition’ of energy companies to prioritising cybersecurity in an increasingly digital world.

ESG Dashboard & Engagement Tracker

Last year also saw the development of both a new in-house ESG dashboard, to enhance access to data, and a bespoke engagement tracker to log and monitor all company engagement data. These new technologies not only act as a base for portfolio managers to develop their views when making investment decisions, but also allow for more nuanced views on issues such as climate transition and business involvement, and human rights, whilst applying internal data relating to RLAM’s voting history and engagement activity.

Ashley Hamilton Claxton, Head of Responsible Investment at Royal London Asset Management said:

“Last year was one of significant change in responsible investment and we witnessed ‘the teenage years’, a period of rapid growth and upheaval. One thing however is certain - none of us can afford to be passive. Now is the time as responsible investors to be active, engaged, and part of the solution.

“The decision to move over £20bn of our tracker equity investments into ESG and carbon-tilted funds was key to this solution, strengthening our voice as active investors engaging and holding companies accountable from an ESG perspective. Our new in-house ESG tools have enabled our Responsible Investment team to support businesses who share our values and want to play their part in the transition to a lower-carbon economy through their pensions, savings and investments.”

Carlota Garcia-Manas, Head of Engagement at Royal London Asset Management said:

“Engagement and advocacy is something we at RLAM feel passionate about – while we don’t believe engagement is a numbers game but should be based on credible outcomes, last year we directly engaged with more companies than ever before.”

“On climate engagement – there is no value of ‘greening our portfolio’ without thinking about the impact on the real world. It’s no good simply selling ‘dirty’ assets if someone else will buy them and may even increase their pollution potential. This year we have revamped and strengthen our climate engagement with companies to ensure they set targets aligned with an ambition to limit global warming to 1.5°C, work to enhance their climate transition plans and act now in reducing real economy emissions.”

–ENDS–

Notes to editors:

(1) The funds’ new objectives are to reduce carbon intensity and improve their ESG and responsible investment profile, in addition to providing low risk returns relative to the benchmark. The changes were applied to the following funds: Royal London UK Core Equity Tilt fund, Europe Ex, UK Equity Tilt fund, Royal London Asia Pacific ex, Japan Equity Tilt fund, Royal London Japan Equity Tilt fund, Royal London US Equity Tilt fund.

The views expressed are those of the author at the date of publication unless otherwise indicated, which are subject to change, and is not investment advice.