Major UK asset manager splits from insurer AIG over climate policies

Legal & General Investment Management will sell stakes in four companies, including US insurer American International Group Inc., after it believes they are making insufficient progress in managing climate change risks.

The UK asset manager said in a statement on Tuesday that it would also sell its investments in Industrial & Commercial Bank of China Ltd., Pennsylvania-based power company PPL Corp. and China Mengniu Dairy Co. or violated “red lines” around the involvement of coal, carbon disclosures or deforestation, “he said.

Climate change is a pressing concern for fund managers: the physical impacts of global warming, such as extreme heat and rising sea levels, as well as the possibility of a rapid and chaotic transition from fossil fuels, pose significant risks. for investors. This leads investment firms to put more pressure on the companies they own to reduce their emissions and prepare for a low carbon future.

Read more: The world’s largest insurers “fail” to tackle climate change and biodiversity loss

“A lot of light opens between leaders and laggards,” said Yasmine Svan, senior sustainability analyst at LGIM. “Climate change is important and constitutes a major risk. Achieving a net zero goal by 2050 is the safest outcome for clients. “

Last action

The latest move by the investment arm of Legal & General Group Plc comes after it announced in October that it would engage on climate issues with more than 1,000 companies that together are responsible for more than 60% of greenhouse gas emissions produced by listed companies. By abandoning the four companies, the asset manager is following through on its threat to sell stakes if the companies fail to meet its minimum standards, including full disclosure of emissions. LGIM said it could also vote against the management of the companies.

LGIM sells its stake in AIG due to the insurer’s lack of policies on excluding thermal coal insurance and because it has not yet disclosed figures on the amount of emissions it finances, measures that LGIM considers a minimum standard for the industry, Svan said. The Industrial and Commercial Bank of China will also be scrapped due to its approach to thermal coal, she said.

The UK fund manager also re-established a company it had previously sold. U.S. food retailer Kroger Co. reinstated following improvements to its deforestation policies and disclosure, as well as efforts to promote plant-based products that have lower climate impact . ICBC’s chief economist said last month that the bank “will establish a roadmap and timetable for phasing out coal funding,” according to the South China Morning Post.

Fund universe

While LGIM manages a total of 1.3 trillion pounds ($ 1.8 trillion), its climate change engagement and divestment approach only applies to funds with £ 58 billion of active. Svan said the approach is applied to funds for which LGIM is “contractually able to divest” and does not apply to most index funds where LGIM must track the composition of the benchmark.

“Each of the companies we invest in on behalf of our clients has many stakeholders beyond us as asset managers, including its employees and suppliers,” said Michelle Scrimgeour, CEO of LGIM, in a press release. “Climate change will affect each of these stakeholders, not least because of its growing financial materiality, so we must use our influence as shareholders to raise standards across the market for the benefit of all.”

Photograph: AIG headquarters in New York. Photo credit: Michael Nagle / Bloomberg.

Copyright 2021 Bloomberg.

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