20 September 2021

Royal London reduces carbon intensity of equity funds in pension default solution by 12%

5 min read

Steve Webb
Royal London

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  • Royal London has reduced the carbon intensity of equity funds in its pension default solution by 12%, since 9 August 2021, by further embedding Environmental, Social and Corporate Governance (ESG) practices.
  • Royal London will more actively manage £23bn invested in equity funds, through this ESG approach. By investing more responsibly for customers, the funds’ annualised carbon emissions have been reduced by over 700,000 tonnes, equivalent to over 400,000 individuals flying economy class from London to Hong Kong.
  • More than half (57%) of consumers believe their pension provider should be responsible for investing their savings to positively impact climate change.

Royal London, the UK’s largest mutual life, pensions and investments provider, has reduced the carbon intensity of equity funds across its pension default investment solution by 12%.

This new approach has increased investment in companies with good ESG practices and decreased fund holdings in companies with poorer practices. This approach, combined with existing proactive engagement with companies and exercising of voting rights, aims to encourage the companies with the largest carbon footprint to do more to tackle the climate crisis.

The changes have been made with no extra charges to customers, and without significantly impacting risk or returns. These funds are one of the key building blocks of Royal London’s flagship investment proposition, the Governed Range, which has more than 1m customers’ pensions invested in it.

New research¹ from Royal London also shows more than half (57%) of consumers believe their pension provider should be responsible for investing their savings to positively impact climate change. This compares to 16% who believe they are personally responsible for the impact of their pension on climate change, and one in ten (9%) who think it’s down to their employer.

Julie Scott, Royal London’s Chief Commercial Officer, said:

“Pensions are invested in a range of companies that are currently shaping the world’s future and have an impact on climate change.  We recognise the power that pensions have, which is why we are investing responsibly and take into account the impact that companies we invest in have on the environment.

“The majority of our customers believe that we have a responsibility to help them invest their pension to positively impact climate change.  That’s why we are making it easy to invest responsibly with Royal London, including making this change to our core pension offering at no extra charge to customers.”

-ENDS-

For further information please contact:

Meera Khanna, Senior PR Manager

Notes to Editors

  1. Royal London commissioned a survey from 6th-19th July 2021 with a sample of 2,943 nationally representative UK adults.
  2. 12% reduction is Weighted Average Carbon Intensity (scope 1 & 2) for the equity funds. This assumes the annualised Weighted Average Carbon Intensity of the non-tilted components of the equity fund has remained constant over the period.
  3. Comparison to flights is based on economy class tickets and is taken from How Bad Are Bananas? The Carbon Footprint of Everything (2020), Mike Berners-Lee.
  4. The total amount of all equity funds managed by Royal London Asset Management (RLAM) on behalf of the Royal London Mutual Insurance Society (RLMIS) that are being “tilted” to achieve a reduced carbon intensity is £23bn, as at 28 July 2021.  This includes equity investments underlying the Governed Range and other RLMIS funds. The main equity fund used in the governed range, RLP Global Manged, constituted 46% of all Governed Range assets, as at 31 July 2021.

About Royal London

Royal London is the largest mutual life insurance, pensions and investment company in the UK, with assets under management of £153 billion, 8.8 million policies in force and 4,075 employees. Figures quoted are as at 30 June 2021.