Climate change presents a threat to the wellbeing of people and the planet, and there’s still a lot to do to reach global goals to limit warming. We want to help our customers invest in a responsible way that meets their needs and is good for society and the environment.
Our Climate Transition Plan
We’re committed to playing our part in tackling climate change. Our Climate Transition Plan shows how we will do that. It describes how we will handle the complex challenges presented by climate change and the opportunities presented by a low-carbon future. We created our plan using guidelines from the Transition Plan Taskforce's framework, which is recognised as best practice in the industry.
Hear more about our climate strategy from Barry O'Dwyer, our Group CEO
Read the transcript
- Barry, great to have you here today to discuss our Climate Transition Plan.
- Yeah, it's good to join you, Jo.
- So we've published our Climate Transition Plan. It describes our climate strategy and the key actions that we need to take this year and beyond. But there's no getting away from, recently we've seen significant shifts in the political landscape, which have led to growing scepticism among some politicians around the urgency of climate action, including the arrival of the new administration in the US, reversing policies, challenging consensus, and as a result, we're seeing global companies are signalling dilution of their climate commitments or just simply staying silent. In that context, people might be questioning why we haven't chosen to delay or even not publish at all our Climate Transition Plan. What would be your response to those questions?
- I think it's a valid challenge. The reality though is that the current political situation probably makes it more important than ever that we publish our Climate Transition Plan. You know, we have benefitted over the last couple of decades from a consensus on the need to take action to tackle climate change. And maybe you're right, maybe you know, consensus is breaking down in certain parts of the world. But from Royal London's perspective, it's really, really important that we retain the confidence of our members, our customers, our clients, that we take this seriously. We have made our commitments to playing our part in moving fairly to a sustainable world, and we need to see those through. You know, I'm very, very pleased with the action that we have taken thus far, but we still have lots more to do. We're dependent, like everybody else is, on government action, and maybe we'll talk a little bit more about that. But we are very, very clear on the commitments that we made, and we are doing our best to fulfil those commitments. It's important though, at all stages, that we're transparent about the progress that we make, and we're clear on the dependencies, who else we need to deliver in order for us to be able to deliver on our plans.
- From the advice of climate scientists and experts, we know that climate change presents significant risks to customer and client investment outcomes, whether that be from the physical risks of climate change or the transition risks, the risks associated with the transition to net zero. It is now widely acknowledged, for example, that the Paris target to limit global temperatures to an increase of one and a half degrees is challenged. It's increasingly unlikely. The global average temperatures in the 12-month period up to the end of April, 2025, hit 1.58 degrees above pre-industrial levels. And the UNFCCC Chief Simon Stiell recently said that progress has been made, but the world is still on a trajectory of global warming of three degrees above pre-industrial times. Some might wonder whether this undermines the viability of our climate strategy. How do you respond to that?
- Well, I suppose we, as well as virtually everybody else, never expected progress to be linear. It was always going to be non-linear in the way that we delivered progress to the Paris ambitions. But also remember that the Paris ambitions were about keeping the temperature increase well below two degrees. Obviously, there was an aspiration to keep it to one and a half degrees, and as you say, that looks increasingly unlikely now. What's important for us is that we manage our transition in a dynamic way. So in other words, we respond to what's happening in the world around us. That means that we might make more progress over certain five-year periods than we make over others. But it is important that we take that long-term perspective. So we have designed our climate strategy to be flexible, to be adaptable so that we can change it as external circumstances change.
- As you've touched on, the success of our climate strategy will be highly dependent on others, particularly policymakers. And we've always been really clear that our progress and commitments are based on the expectation that governments and policymakers will deliver on their commitments to achieve the goals of the Paris Agreement. The UK government, for instance, announced an update last November to its Nationally Determined Contributions, NDCs, now targeting a reduction in greenhouse gas emissions of 81% by 2035 compared to 1990 levels. We played our part in influencing that, we were among the businesses and actually one of the only insurance companies to sign that letter, encouraging the UK government to take that next step. How do you reflect on that growing importance for us to continue to engage with policymakers to drive progress?
- I think this is absolutely central, because without the support of policymakers, without the action of policymakers, then we're going to find it incredibly difficult to deliver on our climate commitments. And the companies that we invest in will find it incredibly difficult to deliver on their climate transition plans. So this is an area of continued focus for us. Now, we are obviously an international investor, but we're a UK-based company and most of our focus is on influencing UK policymakers, UK government. We have had a position of strong consensus on the need for action to combat climate change over the past couple of decades, but that's fraying at the seams. And therefore, part of what we see our job as doing is reinforcing good action from government, positive action on climate change and making sure that they're aware that there is a lot of support for what they're trying to do. But it is a constant battle to make sure that we retain the consensus in the population at large, and then the government follows through on its commitment to create the circumstances where we can implement and support climate transition plans.
- So alongside our engagement with policymakers through our Asset Management business, our engagement with the highest-emitting companies within our portfolio is arguably one of the biggest opportunities we have to influence positive change. We know that divestment versus engagement has been a key question among investors, and we see some investors focusing on exclusions policies. How do you reflect on why our engagement-first approach is the right approach?
- Our Asset Management business has always focused on engagement over disinvestment. The reason for that is pretty simple, which is it's relatively easy to green your portfolio by excluding investments, but selling investments to another investor doesn't actually change real-world emissions. And so the only way to influence companies is by owning them, and by owning some of the world's biggest emitters, we can have an active voice in the boardroom around the need for change. So I think it is consistent with our Purpose and the way that we run Royal London, that we do prioritise engagement over divestment. But that doesn't mean that we don't give the companies that we invest in a bit of a hard time in terms of how serious they are about their climate transition plans. So we look to see have they set emissions targets, are they supportive of the wider transition to net zero, and are they taking meaningful action?
- Our Climate Transition Plan sets out our company's position on investing in fossil fuel companies. What role do you see fossil fuel companies playing in that transition to net zero?
- All companies, all sectors have a role to play. The fossil fuel sector has a particular role to play because these are the companies that have the know-how, the talent, the skills, the operational infrastructure and the capital to both transition away from the old world of fossil fuels, but also transition into a new greener economy. So we do need these companies to transform with us, and for that they need to be supported by a set of government policies that encourages them to transition. And so it's not just local government, or national government policies, it's international co-operation. It is a very complex picture, but we do want to see international co-operation across governments that create the environment for fossil fuel companies to change what they're doing to transition to green energy. And we will continue to engage on that basis. We are focusing on where the opportunities lie for our customers in the transition to net zero. For instance, we've announced our intention to acquire Dalmore Capital, which is a big investor in UK infrastructure because we see that as a growth opportunity for our customers. But really, when you go back to our Purpose, really what we're trying to do is create the environment that our customers will enjoy retiring into. We think that the best outcomes that we will deliver for our customers are outcomes where we play our part in moving fairly to a sustainable world.
- Thanks, Barry. That was a really interesting conversation and I think really demonstrates the importance of our Climate Transition Plan and our part that we have to play in moving fairly to a sustainable world. So thank you.
- Thank you.
Our climate commitments
We believe the best future for our customers is one where society achieves the goals of the Paris Agreement. We want to support the societal transition to a lower-carbon world, while helping our customers and clients build financial resilience.
Our climate strategy shares how we plan to meet our climate commitments across four key areas:
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Engagement for change
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Net zero investments
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Climate-aware investment solutions
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Net zero operations
Our commitments are based on the expectation that governments and policymakers will deliver on their commitments to achieve the goals of the Paris Agreement, and that the required actions don’t go against our legal and regulatory obligations to our members and customers.
Our progress
Here we share examples of how we’re working towards our climate commitments. You can read more about our progress in our Climate Report (PDF).
The actions shared in these examples may not apply to specific funds, as each has its own distinct investment objectives. You can find details specific to your funds in the relevant fund prospectus.
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Engagement and net zero investments
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Climate-aware investment solutions
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Net zero operations
Our approach to fossil fuel investments
Fossil fuels – like coal, oil and natural gas – release large amounts of greenhouse gases when produced and burned. To reach global net zero goals, there needs to be a switch towards using low- or zero-carbon energy sources.
Royal London looks to support a more sustainable future by working with the companies we invest in that are involved in fossil fuel production or that use fossil fuels to generate energy. Where we feel a company isn’t making enough progress against its plans to reduce greenhouse gas emissions or where there is a risk to our investments, we will take investment action. This can include not investing further in a company, reducing our existing investment, or divesting completely. For example, we are phasing out investment in companies heavily involved in thermal coal during 2025. We also engage with UK policymakers to support policies that promote low-carbon energy.
You can learn more about our approach in our Fossil Fuel Investments Position (PDF).
Greenhouse gases and carbon dioxide equivalent (CO2e)
We use the term ‘greenhouse gases’ to cover a number of gases identified as drivers of climate change by the United Nations Framework Convention on Climate Change: carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulphur hexafluoride and nitrogen trifluoride.
To make things simple and comparable across businesses and other polluters, we translate the climate impact of all greenhouse gases into a single measure: 'carbon dioxide equivalent' (CO2e). For example, a gas twice as potent as carbon dioxide (from a climate impact perspective) is assigned two tonnes 'CO2e' for every one tonne emitted.
When we discuss ‘greenhouse gases’, ‘carbon’ or ‘emissions’, then usually the CO2e is our best absolute measure.
Greenhouse gas emissions scopes
The Greenhouse Gas Protocol divides emissions into three 'scopes'. These are:
- Scope 1: Emissions resulting directly from our business activities, such as company cars and gas used in our buildings.
- Scope 2: Emissions resulting indirectly through the purchase of energy, such as through generation of the electricity we buy to light and power our buildings.
- Scope 3: All other indirect emissions resulting from our business activities across our value chain, such as the goods and services we buy, travel and waste. Emissions arising from our investments are also part of Scope 3.
Net zero
Put simply, ‘net zero’ means achieving a balance between the amount of greenhouse gases emitted into the atmosphere and the amount removed from it.
Paris Agreement
A legally binding international treaty on climate change adopted by 196 parties at the UN Climate Change Conference (COP21) in December 2015. Its central aim is to strengthen the global response to the threat of climate change by keeping a global temperature rise this century well below 2°C above pre-industrial levels and to pursue efforts to limit the temperature increase even further to 1.5°C.
Value chain
The value chain is the series of stages involved in producing a product or service that is sold to consumers, with each stage adding to the value of the product or service.