We believe exercising our voting rights is a core part of what we do. We get involved with our investee companies to promote good corporate governance, and follow up our views with our votes.
At Royal London Asset Management, responsible investment is a major part of our history and a vital part of our future.
As part of a mutual group, responsible investment is a natural fit and key element in delivering our Group purpose – Protecting today, investing in tomorrow. Together we are mutually responsible. Benefiting from the stability of being part of the UK's largest life, pensions and investment mutual we can take a longer-term view, ensuring we are well placed to invest responsibly and champion positive, enduring change.
We believe we have a strong track record in this area. We were among the first signatories of the UN-backed Principles for Responsible Investment, launched our Sustainable fund range more than two decades ago, and have an established track record in voting and engagement – using our voice and voting rights to act as powerful stewards of our clients’ investments.
For our investment teams, being a responsible investor means integrating the environmental, social and governance factors into our active investment decisions. We tailor this approach to consider the nuances of the assets we manage because we think that this is in the best interests of our clients to improve standards, reduce risk and enhance returns in their investment portfolios. Responsible investment and stewardship can mean different things to different investors. That’s why we emphasise transparency – talking with our clients to ensure we understand their priorities and they know what our approach is delivering.
We believe that effective responsible investment helps society and produces better results for our investors. We recognise the opportunities in this area: that’s why we will continue to evolve our approach, investing in our people and infrastructure as we play our part in moving fairly to a sustainable world. It’s asset management excellence with a longer-term perspective.
Responsible investing. Meeting the challenge, together
Royal London Asset Management is committed to being a responsible investor. This means being a good steward of our clients’ assets and promoting responsible investment and good governance across asset classes.
Alongside this, we also believe that considering environmental, social and governance (ESG) issues in the investment process can help us deliver better returns for our customers and clients.
At Royal London Asset Management, we have embraced responsible investing for many years and continue to expand our offering in line with the evolving world of ESG best practice – extending our ESG integration practices and integrating these across our asset classes as appropriate.
As our ESG practice has evolved, we’ve invested in our Responsible Investment team, and our research and insight in this area – providing the foundation for future growth in this evolving area.
Principles for Responsible Investment
The Principles for Responsible Investment (PRI) score outlines how signatories’ implementation of responsible investment compares year-on-year, across asset classes, and with peers at the local and global level, by providing a confidential report. Royal London Asset Management has been a signatory of the PRI since 2008 and, like many others, have chosen to publish our latest report and results. These latest scores, published in December 2023 are reflective of the 2022 reporting period.
Scoring is based on star ratings. For each module, responders are given a star rating out of five, which is derived from underlying indicators scores across all modules. Our latest scores are in the table below.
Source: Principles for Responsible Investment, Royal London Asset Management 2023 scorecard 15 December 2023.
* Our customised peer group is European Investment Managers with AUM size €50bn -€249.99bn
"We have been a signatory of the PRI for over 10 years, and we recognise the importance of the survey results to our clients. We are pleased that we improved our scores on passive and quantitative equity to five stars, following our move to ESG tilts in 2021. It’s also great to see we maintained our five-star rating for real estate and achieved a respectable four stars across all other categories." - Ashley Hamilton Claxton, Head of Responsible Investment.
Governance and voting
Volume of activity
In a typical year, we will vote at hundreds of company meetings, comprising thousands of resolutions across global investment markets.
Our approach to these issues is pragmatic and based on local market best practice, evolutions in our thinking, and client feedback about what is most important to them and society as a whole.
We strongly believe in the benefits of voting ‘as a house,’ and by doing so we send a clear and consistent message to companies about our expectations and concerns. While we will often start engaging with companies privately about these concerns, we will also work with other investors or speak publicly to the press where we haven’t seen progress.
Our full historic voting records can be found in our voting database, and our approach to a number of market-specific issues are detailed in our Voting Guidelines. Contact us for further information.
Engagement and advocacy
Building meaningful relationships is core to our stewardship responsibilities and our commitment to being a responsible investor means that we regularly engage with companies held within our funds. These activities give us an opportunity to positively influence behaviours and practices, and reduce the negative ESG impacts of the companies in which we invest.
Whilst we undertake proactive and reactive engagement activities, in order to prioritise key areas for focus we undertake a review of key engagement themes every two years. For 2024-2026 the below six themes are our key engagement focus areas.
The climate is changing and companies have to prepare now for energy transition and the physical impacts of extreme weather. Financial markets and ‘business as usual’ will be disrupted by fire, floods and famine, as well as the policy and infrastructure changes that will be introduced to mitigate these events.
Social and financial inclusion
Companies must ask what they are doing to promote greater economic equality and to protect the vulnerable. Companies succeed when everyone has an opportunity to participate and be a productive member of society.
Nature and biodiversity
Understanding our financed impacts, dependencies, risks and opportunities relating biodiversity and engaging to improve corporate stewardship of nature by encouraging companies to enhance their understanding, management and disclosures relating to nature issues.
Governance and corporate culture
We expect companies to have strong boards, appropriate pay structures, and robust audit and accounting procedures. We will actively engage and vote on executive pay and pensions.
Innovation, technology and society
We take cyber resilience very seriously. Artificial intelligence, personal data privacy, censorship and the ever-increasing growth of technology are issues that we expect companies to scrutinise and plan around.
We expect companies to enable and support healthy employees, customers, and communities. We encourage greater transparency and positive social outcomes.
ESG in investment solutions
We believe unmanaged ESG risk can diminish the value of our clients’ assets. Therefore, we embed ESG issues into our investment and management processes.
Our team of responsible investment professionals work with investment managers and analysts across all asset classes to help identify material risks and issues in the companies and sectors that we invest, for example the impact of wider themes such as climate change.
To help tailor our approach, the Responsible Investment Team conducts quarterly ESG reviews with fund managers to discuss the most relevant and material ESG risks and opportunities. In addition to this formal process, the Responsible Investment Team is in constant contact with the investment teams and this helps to ensure that ESG risks and opportunities are continuously being embedded into investment decision making.
Beyond ESG integration we offer a range of both pooled and segregated solutions to address varying levels of ESG appetite of our clients, including our ethical and sustainable funds.
Our climate change committments
Climate change is the challenge that will define this generation. Temperatures are on track to rise by more than 3 degrees by 2100 if immediate action is not taken to curb global carbon emissions.
Royal London Asset Management has embraced responsible investing for many years. In 2020, we expanded our ESG integration practices and now integrate these across all our asset classes.
We engage with companies to make them better investments for clients, and to effect change on the issues that matter most – including climate change.
Our Net Zero targets
Royal London Asset Management has committed to:
- Achieving Net Zero across our investment portfolios by 2050*
- Reducing carbon emissions from our investment portfolios by 50% by 2030
- Developing solutions that enable clients and customers to invest in the low carbon transition.
“Climate change is the biggest challenge facing our society today. As a responsible investor, Royal London Asset Management's ambition is to work with our clients to be a catalyst for a Paris-aligned economy. This permeates every aspect of our operations – from our Net Zero commitments, to the way we manage properties in our portfolios and how we engage with the companies we invest in."
– Hans Georgeson, CEO, Royal London Asset Management
Putting our commitment into practice
We place great importance on working with companies to make them better investments for our clients and use our voting rights to give them a voice in the boardroom. We engage with companies on a range of subjects with the aim of bringing about specific change on the issues that matter most to us and our clients – from climate change to executive pay and diversity.
Our engagement with energy utilities companies on achieving a Just Transition continues to make good progress. In partnership with the Friends Provident Foundation, we have been supporting and working with energy and utilities companies to monitor and address the social impact of their climate goals.
In November 2020 SSE plc published its first Just Transition strategy, while E.ON issued its first Just Transition statement in March 2021. More recently, Centrica and EDF published their Just Transition strategies in October 2021, Scottish Power published its own strategy during COP26 in November 2021, and National Grid committed to publishing its Just Transition strategy by the end of the 2021.
We are continuing to work with these companies by providing them with feedback on draft strategies and examples of best practice. We are also committed to taking lessons from this engagement and applying it in other contexts. For example, we have leveraged our role as coordinator of the IIGCC Power and Heat Utilities engagement group to produce an investor expectations paper on the utility sector’s path to net zero.
* The term Net Zero means achieving a balance between the amount of greenhouse gases emitted into the atmosphere and the amount removed from it. The commitment is based on the expectation that governments and policy makers will deliver on commitments to achieve the 1.5°C temperature goal of the Paris Agreement. It also assumes this action does not contravene Royal London Asset Management’s fiduciary duty to external investors. The commitment is baselined on the year 2020. It includes assets in funds managed and controlled by Royal London Asset Management, but excludes segregated mandates managed on behalf of external clients, unless otherwise instructed.
- Stewardship and responsible investment report 2022
- Stewardship and responsible investment report 2021
- Stewardship and responsible investment report 2020
- Stewardship and responsible investment statement 2019
- Stewardship and responsible investment activity report 2019
- Climate (TCFD) report 2021
- Climate (TCFD) report 2020
- PRI assessment report 2020