Legal & General Investment Management (LGIM) has announced plans to divest from four companies due to insufficient action to address the risks posed by climate change, whilst a further nine companies will remain on the group's exclusion list.

Announced as part of the group’s Climate Impact Pledge report, LGIM will divest its holdings in Industrial and Commercial Bank of China, AIG, PPL Corporation and China Mengniu Dairy for unsatisfactory responses to engagement, or breaches of red lines, around coal involvement, carbon disclosures, and deforestation.

In addition to this, China Construction Bank, MetLife, Japan Post, KEPCO, ExxonMobil, Rosneft, Sysco, Hormel and Loblaw have all remained on the group’s existing exclusion list, having not yet taken the action required to warrant re-reinstatement.

Kroger, however, which was previously on LGIM’s exclusion list, will be reinstated in relevant funds following improvements in its deforestation policies and disclosure, as well as efforts to promote plant-based products which have a lower climate impact.

LGIM also said that it had been “encouraged by the progress made” through its deeper engagement campaign over the past year, with nearly three-quarters of the 58 companies responding to the engagement campaign, and 13 now having a net-zero target in place.

More broadly, LGIM noted that whilst full compliance with it's minimum climate standards is “rare”, the net-zero momentum has gathered pace, with the number of companies setting net-zero targets nearly double what it was in October 2020.

Alongside the engagement campaign, LGIM also confirmed that, during the 2021 proxy season, it subjected 130 companies to voting sanctions, with banking insurance, real estate, technology and telecoms sectors the most highly sanctioned through votes.

Commenting on the plans, LGIM chief executive officer and UK government COP26 Business Leaders Group co-chair, Michelle Scrimgeour, said: “Climate change is one of the most critical sustainability issues we face and we fully support efforts to align the global financial system with a pathway well below 2°C.

“We have made a strong commitment to push forward this agenda across the different parts of the investment chain, from our engagement with companies and policymakers through to our own investment process and LGIM’s own commitment to net zero.

“Participating in forums like the COP26 Business Leaders Group, ahead of the pivotal climate conference in Glasgow later this year, has emphasised the necessity of coordinated action to address climate risk and steer society towards a sustainable future.

"Progress cannot be made by acting in isolation and we, as investors, have a real role to play in the responsible allocation of capital and acting as stewards to our investee companies to encourage greater progress to meet our overall sustainability goals.

“In the past year I have seen multiple ways in which we at LGIM are tackling the climate change challenge – coming together in forums such as this, as well as the Net Zero Asset Managers Alliance launched in December and most recently the Glasgow Financial Alliance for Net Zero.”

LGIM senior sustainability Analyst, Yasmine Svan, also noted that improvements in data and analytics have allowed the group to increase its coverage and enforce what it considers to be minimum standards with regards to climate risk management.

“At the same time, as investors step up their scrutiny of companies, so too are companies raising their ambitions," she stated.

“We are pleased to be able to add to the number of companies reinstated in our funds following progress and will continue our engagement and collaboration to help increase overall standards across markets.”

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