The pensions and insurance giant Scottish Widows has announced plans to divest nearly half a billion pounds of company investments that fail to meet its environmental, social and governance (ESG) standards. This far-reaching exclusions policy is likely to be just the start for major UK pension providers and asset managers.
Why this change?
There is an ever increasing pressure to protect client portfolios from ESG-related investment risks. This divestment plans to protect nearly six million customers from such climate change risks, with the exclusions being applied across life, pension and OEIC funds.
The policy targets companies that derive more than 10% of their revenue from thermal coal and tar sands, together with manufacturers of controversial weapons and violators of the UN Global Compact on human rights, labour, environment and corruption will be excluded.
The provider aptly explained how, "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.”
Scottish Widows plans to publish its own carbon footprint before the end of 2021 to comply with the Task Force on Climate-related Financial Disclosures (TCFD) framework.
Consumer demand for sustainable investments is growing significantly. The Investment Association published figures, as at November 5th 2020, showing inflows into ESG funds quadrupling in the first three quarters of 2020.
Perhaps it's time to join this inevitable sustainability push?