It’s an interesting dynamic when an insurer drops a fellow insurer. The asset management arm of Britain’s LGIM recently updated its exclusion list to include its peer, AIG. LGIM dropped three additional companies: American energy company PPL Corporation, the Chinese bank ICBC and dairy company China Mengniu Dairy. This decision was based on the companies’ questionable climate policies which are counter to LGIM’s engagements.
LGIM is due to divest from these companies later in the year along with 13 others, which include ExxonMobil, Rosneft, Metlife, and Kepco. LGIM’s divestment program applies to actively managed funds, representing £58 billion of the company’s £1.3 trillion in assets under management. The four most recently excluded companies crossed LGIM’s “red lines”. These red lines consist of seven shareholder engagement themes through which LGIM engages with companies. When no progress is made in these areas, companies are excluded from its investments.
Lack of thermal coal policies
In this scenario, AIG was excluded because it does not have an exit strategy from thermal coal and because it does not communicate on its scope 3 emissions. The same reason was given for dropping Chinese bank ICBC, and energy company PPL has yet to put in place a timetable for phasing out coal-based electricity production. Lastly, Mengniu Dairy has no policy against deforestation and no plans to reduce its scope 3 emissions.
On the other hand, companies like American retailer Kroger have made a comeback. LGIM took it off its exclusion list this year because of its new policy to fight deforestation, and its CO2 emissions reduction targets. "We are pleased to be able to add to the number of companies reinstated in our funds following progress and will continue our engagement and collaboration to help increase overall standards across markets,” said Yasmine Svan, Senior Sustainability Analyst at LGIM.
LGIM recently strengthened its shareholder engagement practice, increasing the number of companies monitored by ESG teams to nearly 1,000. These companies, which belong to the 15 most greenhouse gas-emitting sectors, are subject to voting sanctions when they do not meet the sustainability standards defined by LGIM (board-level climate responsibility, reporting on climate, emissions reduction targets, etc.).
58 of these companies are the subject of in-depth shareholder dialogue in order to guide them towards a carbon-neutral strategy. In addition to the four newly excluded companies, LGIM also voted against the annual reports of 130 companies during the 2021 general meeting season.