Scottish Widows has announced a ‘wide-ranging’ new ESG policy that will see the pensions provider begin by divesting £440 mn ($580 mn) from companies that have failed to meet its ESG standards.
The move is just the beginning of what the 200-year-old insurance provider and subsidiary of Lloyd’s Banking Group says ‘is believed to be the most far‐reaching exclusions policy by a major pensions provider.’
The insurer says it is working with its fund manager partners to divest from firms that pose the greatest ESG risks. ‘Scottish Widows’ new exclusions policy targets companies that derive more than 10 percent of their revenue from thermal coal and tar sands, manufacturers of controversial weapons and violators of the UN Global Compact on human rights, labor, environment and corruption,’ it states in a press release. It adds that if the ‘size and type of investment’ mean it is possible to influence change rather than divest, then it will seek to do so.
‘As a large institutional investor, we have a vital role to play in shielding our customers from ESG investment risks, as well as influencing positive change through the investments we hold. Our exclusions focus on companies we believe pose the most severe investment risk due to the nature of their businesses, which can’t be addressed through engagement,’ says Maria Nazarova‐Doyle, head of pension investments at Scottish Widows, in a statement announcing the plans.
‘The growth of these ‘at risk’ companies is likely to be severely limited by future regulations and the changing views of customers and investors, leading to significant falls in their share prices.’
The exclusions will be applied across the group’s life, pension and open-ended investment company funds, and will apply to index trackers as well as active funds. ‘We’ve worked hard to implement our exclusions across our fund range without limiting this initiative to our actively managed funds,’ says Nazarova‐Doyle. ‘We’re excluding investments from the index trackers that underpin our flagship multi‐asset funds, too’.
The insurer says italso plans to extend its exclusions policy to external pooled funds in the future.
In August Scottish Widows became the first investor in BlackRock’s Authorised Contractual Scheme Climate Transition World Equity Fund, initially allocating £2 bn to the fund, which Scottish Widows helped design. It promises to deliver a data-driven investment approach to measure a company’s exposure to risks and opportunities in the transition to a low-carbon economy.
This year has seen a record number of ESG-related resolutions receive majority support at AGMs around the world, according to data from Proxy Insight reported in the Financial Times. Twenty-one such shareholder resolutions received the support of at least 50 percent of shareholders, up from 13 resolutions in both 2019 and 2018 and just five in 2017, states the paper.