LGIM ditches AIG and three others over climate, votes against 130 companies

The manager will vote against board chairs in 2022

Legal & General Investment Management (LGIM) has dropped US insurer AIG, the state-owned Industrial and Commercial Bank of China (ICBC), US utility PPL Corporation and China Mengniu Dairy from selected funds over climate concerns.

According to the $1.8tn asset manager, the four companies failed to meet its expectations on managing climate risks and had not responded adequately to engagement efforts.

They join nine other firms on LGIM’s climate ‘blacklist’: China Construction Bank, MetLife, Japan Post, KEPCO, ExxonMobil, Rosneft, Sysco, Hormel and Loblaw.

‘We plan to escalate our engagement over time, but ultimately we will automatically vote against any company without net zero targets’ – Sustainability Analyst, Yasmine Svan

The asset manager, the UK’s largest, made the move in accordance with its Climate Impact Pledge programme, which sets out minimum sector-based climate requirements or ‘red lines’ for companies included in $87m of LGIM’s actively-managed portfolios, including all auto-enrolment default funds in L&G Workplace Pensions and the L&G Mastertrust. Those found breaching the red lines face sanctions in the form of votes against management or divestment as a last resort.

In addition to ditching four firms, LGIM said it had voted against annual reports and accounts at 130 companies during the 2021 AGM season for not meeting minimum climate standards. LGIM said this would be escalated to votes against the board chair next year.

This is the first time the investor has reported on its Climate Impact Pledge since last year’s expansion, which saw the number of companies covered by the programme increase from 80 to 1,000 after “improvements in data availability”.

US retailer Kroger has been readded to LGIM’s investment universe as part of the process, after adopting a Net Zero target, and introducing policies and strategies for dealing with deforestation and increasing plant-based and lower climate impact products.

“There is some good news from the last engagement cycle, with about 20% of the companies we engaged with having set Net Zero targets, and the reinstatement of Kroger,” noted LGIM Senior Sustainability Analyst, Yasmine Svan. “However, we observe a widening gap between leaders and laggards where the pace of change isn’t fast enough.”

“We plan to escalate our engagement over time, but ultimately we will automatically vote against any company without net zero targets,” she told RI.

According to LGIM, 74% of companies targeted under the 2020-21 engagement campaign met with the manager, while 19% did not respond. The in-house climate ratings that inform the engagement indicate that Asian companies (ex- Japan) are performing better on average than North American companies, while those in emerging markets had made the largest relative improvement since 2020.