One of the biggest ways that Royal London can have a positive impact on society is through our investment philosophy.
Being a responsible investor
When our policyholders choose a pension or life insurance product, their payments are re-invested on their behalf in stocks, bonds and commercial property. We use the profits from these investments to pay out insurance claims and pensions to our members, which is why we invest them in an ethical manner in products and causes that – in addition to generating good returns – will contribute positively to our overall society and environment.
The majority of our assets are invested with Royal London Asset Management (RLAM), an investment management subsidiary of Royal London Group. RLAM manages £114bn globally. As well as managing assets for Royal London life and pension policyholders, RLAM manages assets for a range of clients including charities, local authorities and universities.
Investing money responsibly is part of everyday business for us, and to ensure we achieve this, we take steps such as voting at company annual meetings, engaging with management and boards of directors to improve corporate practices, and advocating for strong corporate governance.
2017 company engagement topics:
- Remuneration 92%
- Health & Safety 52%
- Reputational Risks 49%
- Energy & Climate Change 46%
- Corporate Governance 22%
2017 - 2019 company engagement plan:
Our focus on engagement throughout 2017 has been, and will continue to be until 2019, on these five areas:
What does responsible investing mean?
Being a responsible investor remains a core part of how we operate, and Royal London Asset Management (RLAM) has been dedicated to constructing and managing sustainable funds for over 25 years.
RLAM has been a long-standing proponent of sustainable investing and the positive impact it can have on investment performance and society, and we achieve this through doing a number of things, including:
- Being a good steward of assets.
- Promoting accountable investment with other stakeholders.
- Offering a range of sustainable and ethical investment options.
- Understand environmental, social and governance risks and opportunities within the investment process.
- Using our influence to promote positive corporate behaviour to the benefit of our clients and the wider community.
- Voting in accordance to principles of good corporate governance
- Engaging with companies, regulators and other agents to push for a more progressive approach on environmental social and governance issues (ESG).
- Promoting views and research on responsible and sustainable investing.
- Making progress on integrating ESG factors where they are relevant to investment in non-screened funds, collaborating with other investors to strengthen the arguments for good practices in these areas and being transparent to clients and to the general public on our successes and challenges.
RLAM has been a signatory to the United Nations Principles for Responsible Investment (UN PRI) since 2008, and as a large investor, takes an active approach to encouraging corporate and industry regulators to improve best practice standards by:
How do we do it?
RLAM’s suite of five multi asset sustainable funds range from 100% equities to 100% fixed income, and offer a flexible mix of capital growth and income:
- Our Royal London Sustainable Managed Income Trust aims to produce a consistently higher level of income relative to typical cash deposit interest rates, by investing predominantly in a diverse portfolio of fixed income securities.
- Our Royal London Sustainable Managed Growth Trust aims to provide an attractive combination of accumulated income and capital growth, by investing predominantly in fixed income securities with some equities, mainly domiciled in the United Kingdom.
- Our Royal London Sustainable Diversified Trust aims to provide capital growth from a diverse range of asset classes, including UK and overseas equities, fixed income, property related investments and cash.
- Our Royal London Sustainable World Trust aims to provide capital growth, by investing predominantly in equities with some fixed income securities and cash on a global basis.
- Our Royal London Sustainable Leaders Trust aims to provide capital growth, by investing predominantly in UK companies, with some exposure to overseas equities. The Fund is relatively concentrated, with typically 40-50 holdings. You can read more about our suite of asset funds as well as our investment process and team here.
Governance and Stewardship
The UK Stewardship Code was published in July 2010. It aims to enhance the quality and effectiveness of engagement between institutional investors and companies, and to help improve long-term returns to shareholders. It also sets out principles of good practice that the Financial Reporting Council (FRC) believes institutional investors should aspire to when engaging with investee companies.
RLAM is fully supportive of the Stewardship Code and complies with the Code, in particular the seven principles contained in the document, about which you can read more in our full statement.
RLAM’s tangible social impacts:
We currently lend £3bn to the UK social housing sector, investing in bonds issued by charities whose main mission is to provide housing to those in need. The funding we provide helps to support housing associations in building new affordable homes, as well as maintaining its existing stock, filling a gap in funding due to lower support from government and reduced lending by banks.
We support ‘green infrastructure’ projects such as offshore wind farms, biomass plants and sanitation services. One example of this, the Thames Tideway super sewer, will divert tens of millions of tonnes of sewage from the river Thames, and our investment will help fulfil a key component of HM Treasury’s National Infrastructure Plan. Our financing for offshore wind farms and biomass is helping the UK to reduce its carbon emissions and to build more sustainable energy infrastructure. RLAM’s total investment in these projects is £274m.
We have five Sustainable Funds that currently have over £1.7bn in assets under management, and the mandate is to invest in companies that provide a ‘net benefit to society’ or are leaders in managing environmental, social and governance issues. The Sustainable Funds invest in companies that are working towards making the world a better place, such as sustainable agriculture, healthcare, cloud computing and electric vehicles. These funds have won 14 awards this year, highlighting how sustainability can be a driver of great investment performance.