Scottish Widows has pulled millions out of companies that fail to meet its new environmental, social and governance standards.
The pension provider announced that it would divest £440 million from companies that pose significant ESG risk in a move that would protect nearly 6 million customers from ESG-related investment risks and warned that this figure could “grow much further” if companies do not take action to improve the sustainability of their business practices.
Scottish Widows’ wide-ranging policy will cover both its investment, life and pension funds and the firm’s own investments, with plans to extend to external pooled funds in the future. It excludes investments from the index trackers which underpin its multi-asset funds.
The new exclusions target companies which derive more than 10% of their revenue from thermal coals and tar sands; manufacturers of controversial weapons; and violators of the UN Global Compact (UNGC) on human rights, labour, environment and corruption – unless the size and type of investment means that the Scottish Widows can influence positive change in their business models.
Maria Nazarova-Doyle, head of pension investments, Scottish Widows, said: “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. 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 move is believed to be the most far-reaching exclusions policy by a major pensions provider and follows Scottish Widows’ collaboration with BlackRock to design a fund that integrates ESG considerations into its pension funds. The ACS Climate Transition World Equity Fund backs businesses that decrease carbon emissions, increase clean technology revenue and display more efficient water and waste management.