Investment strategies
We have appointed the asset managers Foreign & Colonial to actively engage with the boards of companies in which our central fund invests. They seek to encourage positive action on climate change and the long-term value protection this inevitably brings.
- Consider the implications of climate change for company performance and shareholder value, and incorporate this information into our investment decision-making process.
- Encourage appropriate disclosure on climate change from the companies in which we invest.
- Encourage improvements in the energy efficiency and climate resilience of our investment property portfolio.
- Communicate our investment beliefs and strategy on climate change to our customers and shareholders.
- Share our assessment of the impacts of climate change with our pensions’ trustees.
How is Lloyd’s taking action and incorporating climate change into our investment strategies?
Chimi Chweya on incorporating Climatewise into our investment strategies.
Shareholder Power
At Lloyd’s we believe we should use our shareholder power to influence the behaviour of the companies in which we invest – and persuade them to respond more effectively to the impact of climate change. This approach is designed to support measures that will improve the long-term performance of investee companies.
Since 2008, F&C have provided a service engaging those companies in which Lloyd’s Central Fund invests and to exercise the fund’s voting rights in pursuit of environmental, social and governance issues. During 2009, F&C voted 129 times on the segregated accounts managed for the fund.
Our investment in a pooled fund is voted by its fund manager. F&C engaged on all the accounts including the pooled fund, with 642 engagement actions initiated, leading to 249 instances where companies changed their way of managing ESG (Environmental, Social and Governance) issues. F&C typically asks for better management of emissions and for the development of enhanced climate change strategies.
An example of the direct action taken by F&C is its engagement with oil giants BP, Royal Dutch Shell and Total on climate change strategy. With high greenhouse gas emissions from their production processes, and a business model based on selling fossil fuels, the sector is highly exposed to climate regulation.
F&C therefore encouraged these companies to provide evidence that they have fully considered the impact of climate change on their long-term business strategies. Early in 2010 BP and Shell responded by publishing the carbon price which they assume in their investment decisions, whilst Total went further by announcing a new greenhouse gas target for 2015.
For investments where the F&C overlay service does not apply, a review was initiated of alternative sustainable fund options offered directly by our current external managers. It expected that this work will be concluded during 2010.
Communicate our beliefs.
We arranged for F&C to present to various groups in Lloyd’s on their approach to responsible investment and their activities on behalf of the Central Fund. Representatives from the Investment Team at Lloyd’s have attended Lloyd’s ClimateWise Group meetings and have presented on the actions taken by Lloyd’s centrally in respect of principle 4.
