Investing responsibly

Your pension is powerful. Let's invest it responsibly.

The world has you thinking your pension sits there, waiting for a rainy day. But that couldn’t be further from the truth.

Pensions are active. Pensions are invested on your behalf. And when invested properly they can help to make the world a better place. We’re committed to acting and investing responsibly for you, and by you we mean the Invested Generation.

We’re a modern mutual with purpose, dedicated to making sure your pension and your principles are in safe hands. We aim to grow your money, while also making a positive impact on our society and environment – to help you retire into a future worth living in.

Download our 'Investing responsibly with us' brochure (PDF 597KB) to get the details.

Cover of 'Investing responsibly'

How your pension can make a difference

At Royal London we are committed to be a Responsible Investor.

And that means looking at the bigger picture.

It’s about looking at Environmental, Social and Governance factors, or ‘ESG’ for short.

For example, we might look at a company’s position on environmental responsibility, cyber security, or boardroom diversity.

As part of this commitment, we’re asking all our asset managers to consider financially material ESG risks and opportunities when they make investment decisions.

And to be good stewards by voting and engaging with companies to improve the way they’re run.

We fully expect all asset managers who we choose to work with to be putting these principles into place.

To us, Responsible Investing isn’t about choosing values over value - it’s about managing risk, making better investment decisions, and generating better long-term results for our customers.

Welcome to the start of a new generation, the Invested Generation

Your pension is invested in the companies shaping the world’s future. It might be the most money any of us will ever have invested in our lifetimes so it’s only right it gets used to help make positive change.

We don’t have shareholders, but as a leading investor we are a shareholder in other companies. So, we can share our customers’ opinions and influence important policies all because of your pension. The bigger your shareholding, the more influence you can have, it’s as simple as that. This puts large pension companies, like us, in a strong position to make a difference on your behalf – from helping to drive the move to a low carbon economy to advocating for more diverse workforces.

When we say your pension is powerful, we mean it. We aren’t just talking about your future financial security, but as a way of championing for the world you want to live in. It’s all extremely exciting when you think about it. It’s what being part of the Invested Generation is all about. Wanting your investments to do well and to do good.

The difference is down to the decision-making

We know you care about making more responsible choices, which is why environmental, social and governance (ESG) factors are included in the investment decisions we make.

This is not the time to be passive, it’s the time to come together as the Invested Generation.

As the UK’s largest mutual insurance and pension provider, we’re committed to acting and investing responsibly. We choose the asset managers that look after your investments in a responsible way and ask them to consider environmental, social and governance issues in their decision-making.

We also aim to act on your behalf to influence and challenge the companies you own shares in, on issues such as CO2 emissions, modern slavery policies, and executive pay.

“Our ultimate goal is to use our position as shareholders or bondholders to have a positive influence on behaviour, because we think that is in the best long-term interests of our clients.”

Ashley Hamilton Claxton, Head of Responsible Investment, Royal London

Your money is making good things happen

We think the next decade will shape the world for generations to come, and we want you to be able to retire in a future worth living in.  But the effects of climate change put that in jeopardy.

That’s why we’re making some changes to the funds you’re likely to be invested in if you have a workplace pension with us.  We think these changes are good news, both for you and for the planet. And I’d like to explain why.

We believe that you can’t have a good standard of living in retirement if the effects of climate change mean that, for example, your home is at risk of flooding every few years or summers are so hot that you can’t go outside. We’ve already made a commitment to halve the carbon emissions of our investments by 2030 and to achieve Net Zero by 2050. Net Zero means that the amount of greenhouse gases produced by a company or -in our case - our investments - is balanced by the amount that’s removed from the atmosphere.

As part of our Net Zero commitment, we’re making changes to our workplace pension default fund. If you have a workplace pension through us, it’s where your pension savings are likely to be invested and is part of our Governed Range. All pension funds invest in a range of different assets, but typically this will include shares in different companies, called equities, loans to companies, called bonds, and property. The shares could be in anything from technology providers to pharmaceuticals companies.

We’ve now started investing less in those companies that emit the most carbon and more in companies that emit less. As a result, the carbon intensity on the largest portion of our Governed Range, which is equities, is reducing more than 10%. And we’re doing this at no extra cost to you, and without significantly changing the risk to you. Our customers have told us they care about where we invest their money. And so do we.

If you want to find out more, go to The power of your pension

If you’re invested in our Governed Range (where most of our pension customers are invested) you can feel assured that your investments are helping to tackle climate change.

Find out more

Climate change as a key issue

We work actively with the companies that we invest in. So we can influence their plans to reduce their carbon emissions and transition to a sustainable world in a way that considers the impact on society.

We’ve made climate change commitments to tackle and minimise the impacts of climate change, both through how we work as well as the investments we make.

Action we’ve already taken to help build a better future

We've collaborated with many companies to improve ESG factors

Learn more  about We've collaborated with many companies to improve ESG factors

We apply active governance to look after your money

Learn more  about We apply active governance to look after your money

Together for good

We're signatories to these climate initiatives:

Climate Action 100+ logo
Institutional Investor Group for Climate Change logo
Race to Zero logo

Frequently asked questions

ESG stands for Environmental, Social and Governance, which are three key factors that help investors measure the ethical and sustainability impact of a business or sector.

When looking at the first factor for example, an investor would examine what damage a company is doing to the environment. Is it causing pollution? If it’s a chemical company, does it have a history of leaks or spills? And does it clean up after itself? If it’s an oil or gas company, is it extracting as cleanly as possible? And what are its carbon capture plans or energy transition plans? How is it planning to change in future years? 

The social element involves finding out if a company is looking after people and not exploiting anyone. Does the company care for its employees, its suppliers, customers and the communities that it is involved with? For companies with employees and suppliers in developing countries, where employment law can be less formal, this is particularly important.

Governance is about how well companies are run. Do they follow all the legal and accounting requirements? Are they carrying out thorough audits, and do they have all the necessary checks and balances in place? What’s their attitude to company pay and executive bonuses? Do they always put their shareholders’ interests first? Are they as open with shareholders as possible?   

An investor who is ESG aware will want to know that these credentials are strong before investing.

We’re a long-term investor and we recognise the long-term challenges that climate change can have on our investments, business, our customers, and of course, the planet.

We know climate change is the challenge that will define our generation and we need to take action to carb global carbon emissions. You can find out more about how we're committed to tackling climate change.

Backed by the United Nations, the PRI are six principles that investors should follow if they want to create a more sustainable global financial system:

  1. We will incorporate ESG issues into investment analysis and decision-making processes.
  2. We will be active owners and incorporate ESG issues into our ownership policies and practices.
  3. We will seek appropriate disclosure on ESG issues by the entities in which we invest.
  4. We will promote acceptance and implementation of the Principles within the investment industry.
  5. We will work together to enhance our effectiveness in implementing the Principles.
  6. We will each report on our activities and progress towards implementing the Principles.

Royal London Asset Management (RLAM) signed up to the UN’s PRI in 2008, and we became signatories in January 2020.

The UK Stewardship Code 2020 is a substantial revision of the 2012 edition, and came into effect 1st January 2020. The code aims to improve the way investors and companies communicate and work together, setting out principles of good practice that the Financial Reporting Council (FRC) believes investors should aim for when engaging with companies.

No, but we are supportive of the code. RLAM is currently a signatory, and we aim to become a signatory too.

We exclude cluster munitions, anti-personnel landmines, and biological and chemical weapons based on guidance from the following international conventions and treaties:

  • The Biological Weapons Convention 1975, prohibits the development, production and stockpiling of bacteriological (biological) and toxin weapons
  • Anti-Personnel Mines Treaty 1997, also known as the Ottawa Convention, prohibits the use, stockpiling, production and transfer of anti-personnel mines
  • The Chemical Weapons Convention 1997, prohibits the development, production, stockpiling and use of chemical weapons
  • The Convention on Cluster Munitions 2008, prohibits the use, production, transfer and stockpiling of cluster munitions.

No fund will knowingly invest in corporate equity and/or debt involved in the manufacture and sale of cluster munitions, anti-personnel landmines, or biological and chemical weapons.

Our asset managers are required to disclose their voting policy and record to us, and we’ll use this information to make sure they’re keeping to our responsible investment policy.

We’ll include updates on our responsible investment activities in our annual report, which is presented to our Board, members and customers. Where possible, we’ll also disclose the voting records of our asset managers on our website.

ESG stands for Environmental, Social and Governance, which are three key factors that help investors measure the ethical and sustainability impact of a business or sector.

When looking at the first factor for example, an investor would examine what damage a company is doing to the environment. Is it causing pollution? If it’s a chemical company, does it have a history of leaks or spills? And does it clean up after itself? If it’s an oil or gas company, is it extracting as cleanly as possible? And what are its carbon capture plans or energy transition plans? How is it planning to change in future years? 

The social element involves finding out if a company is looking after people and not exploiting anyone. Does the company care for its employees, its suppliers, customers and the communities that it is involved with? For companies with employees and suppliers in developing countries, where employment law can be less formal, this is particularly important.

Governance is about how well companies are run. Do they follow all the legal and accounting requirements? Are they carrying out thorough audits, and do they have all the necessary checks and balances in place? What’s their attitude to company pay and executive bonuses? Do they always put their shareholders’ interests first? Are they as open with shareholders as possible?   

An investor who is ESG aware will want to know that these credentials are strong before investing.

We’re a long-term investor and we recognise the long-term challenges that climate change can have on our investments, business, our customers, and of course, the planet.

We know climate change is the challenge that will define our generation and we need to take action to carb global carbon emissions. You can find out more about how we're committed to tackling climate change.

Backed by the United Nations, the PRI are six principles that investors should follow if they want to create a more sustainable global financial system:

  1. We will incorporate ESG issues into investment analysis and decision-making processes.
  2. We will be active owners and incorporate ESG issues into our ownership policies and practices.
  3. We will seek appropriate disclosure on ESG issues by the entities in which we invest.
  4. We will promote acceptance and implementation of the Principles within the investment industry.
  5. We will work together to enhance our effectiveness in implementing the Principles.
  6. We will each report on our activities and progress towards implementing the Principles.

Royal London Asset Management (RLAM) signed up to the UN’s PRI in 2008, and we became signatories in January 2020.

The UK Stewardship Code 2020 is a substantial revision of the 2012 edition, and came into effect 1st January 2020. The code aims to improve the way investors and companies communicate and work together, setting out principles of good practice that the Financial Reporting Council (FRC) believes investors should aim for when engaging with companies.

No, but we are supportive of the code. RLAM is currently a signatory, and we aim to become a signatory too.

We exclude cluster munitions, anti-personnel landmines, and biological and chemical weapons based on guidance from the following international conventions and treaties:

  • The Biological Weapons Convention 1975, prohibits the development, production and stockpiling of bacteriological (biological) and toxin weapons
  • Anti-Personnel Mines Treaty 1997, also known as the Ottawa Convention, prohibits the use, stockpiling, production and transfer of anti-personnel mines
  • The Chemical Weapons Convention 1997, prohibits the development, production, stockpiling and use of chemical weapons
  • The Convention on Cluster Munitions 2008, prohibits the use, production, transfer and stockpiling of cluster munitions.

No fund will knowingly invest in corporate equity and/or debt involved in the manufacture and sale of cluster munitions, anti-personnel landmines, or biological and chemical weapons.

Our asset managers are required to disclose their voting policy and record to us, and we’ll use this information to make sure they’re keeping to our responsible investment policy.

We’ll include updates on our responsible investment activities in our annual report, which is presented to our Board, members and customers. Where possible, we’ll also disclose the voting records of our asset managers on our website.

Shareholder Rights Directive II - (SRD II)

We invest £108bn* on behalf of our customers, of which around a third is invested in the shares of listed companies (equity investments).  The proportion of equity held in each investment strategy depends on the product. Our with profits products provides additional guarantees and smoothing, more detail on these products and their investment strategy can be found in the Principles and Practices of Financial Management.

We’re committed to being a responsible investor. This means that good stewardship is hugely important to us, as is choosing the right asset managers to make investment decisions on our behalf. You can find out more in our Responsible Investment policy and our Stewardship and Engagement policy.We work with our primary asset manager Royal London Asset Management (RLAM) to exercise our stewardship responsibilities. Read more about RLAM’s approach to Responsible Investment.

*as at 31 Dec 2020

Glossary

We recognise that not everyone uses the same language or terminology when talking about stewardship and responsible investment, so we’ve provided a glossary below to explain how we use these terms.

We’ve adopted the most widely recognised industry standard definitions, based on the UK Investment Association’s responsible investment Framework, the Principles for Responsible Investment and the Global Sustainable Investment Alliance (GSIA).

Purposeful dialogue between investors and companies on environmental, social and governance (ESG) issues with the intention to influence (or identify the need to influence) company behaviour or improve disclosure.

Carbon neutrality refers to achieving net-zero carbon dioxide emissions. This can be done by balancing emissions of carbon dioxide with its removal through carbon offsetting or by eliminating emissions.

Conference of Parties and global United Nations summit about climate change and how countries are planning to tackle it. COP26 is due to take place in Glasgow in November 2021.

The systemic and explicit inclusion of environmental, social and governance (ESG) factors into investment analysis and investment decisions.

Explicitly prohibits investing in a particular company, sector, business activity, country or region.

Investments made with the intention to generate positive, measurable social and environmental impact alongside financial return.

An unsubstantiated claim to deceive customers into believing that a company’s products are environmentally friendly.

This refers to the balance between the amount of greenhouse gas produced and the amount removed from the atmosphere. We reach net zero when the amount we add is no more than the amount taken away.

Using our rights as shareholders to vote at the Annual or Extraordinary General Meetings (AGM/EGMs) of the companies in which we invest, usually electronically.

Investing clients’ money in a responsible way, taking account of material environmental, social and governance (ESG) risks, and implementing our stewardship responsibilities.

The responsible allocation, management and oversight of capital to create long-term value for customers leading to long-term benefits for the economy, the environment and society. It is our fiduciary duty to be good stewards of our customers’ capital.

Meeting present needs, without compromising the ability of future generations to meet their needs.

An investment strategy which invests in companies that meet sustainability criteria or deliver sustainable outcomes through the products and services they provide and/or their business conduct.

Purposeful dialogue between investors and companies on environmental, social and governance (ESG) issues with the intention to influence (or identify the need to influence) company behaviour or improve disclosure.

Carbon neutrality refers to achieving net-zero carbon dioxide emissions. This can be done by balancing emissions of carbon dioxide with its removal through carbon offsetting or by eliminating emissions.

Conference of Parties and global United Nations summit about climate change and how countries are planning to tackle it. COP26 is due to take place in Glasgow in November 2021.

The systemic and explicit inclusion of environmental, social and governance (ESG) factors into investment analysis and investment decisions.

Explicitly prohibits investing in a particular company, sector, business activity, country or region.

Investments made with the intention to generate positive, measurable social and environmental impact alongside financial return.

An unsubstantiated claim to deceive customers into believing that a company’s products are environmentally friendly.

This refers to the balance between the amount of greenhouse gas produced and the amount removed from the atmosphere. We reach net zero when the amount we add is no more than the amount taken away.

Using our rights as shareholders to vote at the Annual or Extraordinary General Meetings (AGM/EGMs) of the companies in which we invest, usually electronically.

Investing clients’ money in a responsible way, taking account of material environmental, social and governance (ESG) risks, and implementing our stewardship responsibilities.

The responsible allocation, management and oversight of capital to create long-term value for customers leading to long-term benefits for the economy, the environment and society. It is our fiduciary duty to be good stewards of our customers’ capital.

Meeting present needs, without compromising the ability of future generations to meet their needs.

An investment strategy which invests in companies that meet sustainability criteria or deliver sustainable outcomes through the products and services they provide and/or their business conduct.