ESG Document Library
Policies
There are a number of potential conflicts of interest inherent in the corporate governance activity undertaken at LGIM. Detailed are some of the frequent conflicts of interests that we identify and resolve through the application of the conflicts of interest policy. This is not an exhaustive list, and the Investment Stewardship team may encounter additional conflicts not detailed in this policy.
Through the implementation of this controversial weapons policy, Legal & General Investment Management (Holdings) Limited (‘LGIM(H)’) and its subsidiaries will exclude from its investments those companies involved in the manufacture and production of cluster munitions, anti-personnel landmines, and biological and chemical weapons.
This document sets out Legal & General Investment Management (LGIM)’s expectations of investee companies in the North American market in terms of environmental, social and governance issues. This is a region-specific document and is therefore separate to our Global Principles document, which provides a full explanation of LGIM’s approach and expectations in respect of topics we believe are essential for an efficient governance framework.
LGIM has been using metrics related to diversity in our proprietary ESG scores since 2018, and while metrics related to diversity are increasing in availability, we recognize that more needs to be done to improve the standardisation and increase the scope and coverage of this data to support assessment across investors’ portfolios. We will continue to work with companies, stock exchanges and regulators, and research and data providers to this end.
We understand the critical importance that sustainable forestry has in both combating climate change and preserving biodiversity, two systemic risks facing the world economy today, with significant implications for our clients’ assets if left unaddressed. We also recognise that deforestation needs to be considered through a holistic lens, assessing both the environmental and social aspects of this issue; for example, the impact on indigenous people, and respective labour rights in operations and supply chains.
Ongoing dialogue with companies is a fundamental aspect of LGIM’s commitment to responsible investment. Engagement will be triggered in a variety of ways, such as a regular catch-ups; analysis of responsible investment themes and voting issues; general knowledge of the company; or a media report.
Having respect for human rights is not only the right thing to do, but also financially material. The United Nations (UN) Guiding Principles of Business and Human Rights (UNGPs) outline the duties of states and business under three pillars - protect, respect and remedy. As an investor, we understand the critical importance of human rights, especially to our clients to whom we have fiduciary duties as managers of their assets. If left unaddressed, investors – even those with minority shares in a company – may be inadvertently connected to adverse impacts of human rights breaches caused by, contributed to, or linked to investee companies as a result of their ownership or management of stakes in those companies.
The purpose of this policy is to set out the framework by which LGIM integrates sustainability risks and opportunities into the investment decision-making process and to consider the principal adverse impacts (PAIs) of investment decisions on sustainability considerations. Our Sustainability Policy reflects the structure of our Investment, Investment Stewardship and other teams across the firm, as well as the nature of LGIM as a global business.
Reports
In our 12th annual Active Ownership report, we outline the decisive action we took with the aim of delivering positive change on behalf of our clients on a broad range of ESG issues in 2022. We exercised voting rights across our entire book, while engaging with companies, policymakers and other stakeholders on issues from the living wage, to deforestation, to board-level ethnic diversity.
In this document, our 11th annual Active Ownership report, we outline the decisive action we took across a broad range of ESG issues – from healthcare, to income inequality, to climate change. The report is our second response to requirements under the UK Stewardship Code. It provides what we believe to be a full and fair representation of our stewardship activities and outcomes, complementing our quarterly ESG reports.
The pandemic disrupted our lives in 2020 in numerous and profound ways. In our tenth annual Active Ownership report, we outline the decisive action we took on behalf of our clients during this challenging period across a range of environmental, social and governance issues.
Active ownership means working to create sustainable value for our clients. Our annual report details how we achieved this in 2019.
LGIM’s 7th Climate Impact Pledge report outlines the actions taken in 2022 to drive positive change on behalf of our clients on decarbonization and the related issues of biodiversity and nature loss. This year, our expanded methodology covers more companies than ever. As the pathway to 1.5°C becomes even more challenging, we have raised our expectations.
This is LGIM's sixth annual Climate Impact Pledge. Our report details the changes since 2021 and outlines LGIM’s approach to climate stewardship. In the first half, we present a data-driven overview of how our ratings have evolved across different sectors and regions; in the second, we present examples of our engagements with companies on our priority list in each sector.
Last year, we strengthened and expanded our Climate Impact Pledge – our dedicated engagement program on climate issues – to focus on around 1,000 global companies in 15 climate-critical sectors. We are pleased to publish our first report under this new approach.
This document sets out the framework, governance processes and methodology of the updated LGIM Climate Impact Pledge ratings (CIP ratings). The CIP rating is used as a key input into climate-related stewardship activities such as voting.
More details on the methodology, alongside research detailing the pathways and expectations for each key sector we engage with, can be found in these sector guides.
Thought Leadership
In this guide, we set out our expectations as a long-term investor regarding what ESG information our investee-listed companies should report on, and how to communicate this information effectively to stakeholders.
Mergers and acquisitions (M&A) are a key feature of capital markets that provides
companies with the opportunity to enhance and generate optimal returns to investors. However, large transformational transactions also carry significant risks and often do not generate the long-term value promised.
Throughout history, humans have risen to address challenges to the health. Therefore, it is our goal at LGIM to understand how regulation will manifest itself and than those who are not.
Boards should be fully accountable for their organisation’s approach to risk management, target setting, strategic development and reporting, as it relates to climate change and, where relevant, the interrelated issues of biodiversity and deforestation.
We’ve met with hundreds of company boards about improving their levels of gender diversity. The pushback we receive can be quite surprising.
LGIM believes equal voting is an essential right for shareholders and is a strong proponent of the ‘one share, one vote’ standard, based on the principle that control of the company should be commensurate to one’s economic interest.
In 2019, LGIM ran a targeted engagement campaign focused on social, governance and transparency issues at large companies with poor ESG scores. After giving them
an opportunity to improve their scores, we take a quantitative look at the results in this paper to identify whether progress has been made.
The horrifying killing of George Floyd and so many others has led many institutional investors to think much more seriously about structural racism and inequality. At LGIM, we believe asset managers must go further – now is the time for action.
In this paper, we explain how we have expanded our diversity campaign and share some of our key research findings, both in general and within each market. We also summarize key points relating to the regulatory backdrop for diversity in these countries, and we look at which influential collaborations are active in these markets. We finish by setting out our next steps for LGIM’s engagement campaign.
Our latest Climate Solutions research suggests the window to achieve a 1.5°C outcome, consistent with net zero emissions by 2050, is closing fast. But it also highlights the surprisingly positive potential reductions in the cost to achieve such an outcome. We believe now is the time for the world, policymakers and investors to embrace every legitimate tool in the decarbonization toolkit.
An expanded set of analysis tools can help investors navigate risk and identify those companies that might succeed in a rapidly changing world.
The scrutiny on executive pay in North America is increasing year on year. In this note, we outline our stance on the issue.
LGIM has committed to work in partnership with our clients to reach net-zero greenhouse gas emissions by 2050 or sooner across all assets under management. In addition, drawing on industry best practice, we have set out LGIM’s key requirements for a strategy or investment portfolio to be considered net zero aligned.
The Sustainable Development Goals (SDGs), set by the United Nations, are a framework for articulating some of the most pressing social, economic and environmental issues that could threaten the livelihood and wellbeing of everyone on the planet unless they are addressed urgently. We fully support the objectives of the SDGs, but for the aforementioned reasons we do not claim to be managing assets directly according to them. Instead, many of the SDGs’ principles and themes are embedded in our approach to responsible investment. We believe there are four specific ways in which our efforts can be linked to the principles of the SDGs.
A common goal of limiting global warming to well-below 2°C – and ideally 1.5°C by the end of the century as set out in the Paris Agreement – does not mean there is a
common or accepted path for how to get there. There are as many ‘pathways to Paris’ as there are climate scenario models. Yet there are some points on which all models
seem to agree.
We have written this guide to provide an insight into how we understand culture and ways in which culture informs the behaviours, performance and outcomes in companies, helping leaders to build and engage with their people as assets: their 'human capital'.
Unless otherwise stated, references herein to "LGIM", "we" and "us" are meant to capture the global conglomerate that includes Legal & General Investment Management Ltd. (a U.K. FCA authorized adviser), LGIM International Limited (a U.S. SEC registered investment adviser and U.K. FCA authorized adviser), Legal & General Investment Management America, Inc. (a U.S. SEC registered investment adviser) and Legal & General Investment Management Asia Limited (a Hong Kong SFC registered adviser). The LGIM Stewardship Team acts on behalf of all such locally authorized entities.© 2023 Legal & General Investment Management Limited. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, including photocopying and recording, without the written permission of the publishers.