How we invest responsibly in the Governed Range

Equity investments are the main growth-seeking assets in Governed Range portfolios.

Our tilt funds aim to meet a variety of client needs by using the best elements of both passive and active investing.

They track a market index but actively adjust (tilt) how much they invest in some companies. This means they can invest more in some companies and less in others, compared with the index. These adjustments help manage environmental, social and governance (ESG) risks and improve the fund’s ESG profile. Our tilt funds:

• Have an intrinsic investment goal to align to net zero by 2050, with an interim 50% carbon reduction target by 2030 – baselined on the year 2020¹ 
• Reduce exposure to companies with high carbon emissions, poor social practices and where we have concerns about their corporate governance
• Are subject to strict tracking error limits, helping to protect broad market exposure with low active risk
• Integrate insights from Royal London Asset Management’s engagement activity with companies.

Find out more in our Tilt funds guide.

We also integrate ESG into the investment process for our other actively managed equity funds. This includes:

• ESG considerations as part of risk management, alongside financial analysis
• Proxy voting, and active engagement with companies across our portfolio on important issues
  to help influence outcomes that support long-term value for our customers and your clients.

Underlying funds have their own investment objectives and will make investment decisions accordingly. Some funds will not have an explicit goal to achieve a defined positive ESG outcome.

Discover more about Royal London Asset Management's wider engagement activities, which support decision-making for our equity funds.

¹Find out how the tilt funds are designed to meet our climate ambitions in Equity tilt funds and climate commitments (a supplement to the tilt fund prospectus).

Our property investment managers are committed to net zero, including:

• Achieving net zero carbon by 2030 for our directly managed property assets and developments, and by 2040 for our indirectly managed property assets²
• Thoroughly assessing responsible investment risks and opportunities across the property investment lifecycle, including physical climate risk, decarbonisation and biodiversity
• Collaborating with occupiers and local stakeholders to deliver positive environmental outcomes and social value.

These commitments apply at firm level across our property assets. Individual funds will have different investment objectives, so not all commitments will apply to every strategy. Investors should see the relevant fund factsheets for fund-specific details.

Find out more about Royal London Asset Management's approach to property.

²Directly managed property assets are those over which Royal London Asset Management has complete
operational control and greater than 50% equity share, as well as joint ventures where it would cover the
proportionate amount of emissions. Developments are any new development or major refurbishment that
comes online from 2030 onwards.

Our own ESG and bespoke climate research supports our fixed income investment process. We use this insight, along with input from our credit analysts, ESG and responsible investment specialists to help us identify risks, improve our value assessments and strengthen our investment decisions.

We don’t take the same approach across all underlying funds but our strategies include:

• Comprehensive ESG integration – we score companies across a range of ESG factors
• Climate Conviction Framework – expert in-house analysis helps evaluate how prepared companies are for a net zero transition
• Focused research – we prioritise sectors and issuers where ESG and climate risks are most significant and where external data may be limited
• Active engagement – where risks are identified but aren’t assessed as currently material to creditworthiness, we may engage with issuers to help support improved outcomes.

We don’t invest directly in commodities. Instead, our exposure to commodities is through index futures.

As a large investor, we can use our wider engagement activity to help influence ESG issues linked to commodities. This includes:

• Advocating for higher ESG standards in mining and production
• Supporting industry best practices
• Promoting a fair, sustainable transition across the entire commodities value chain.

Our in-house research supports the integration of ESG considerations in our cash-type funds. Our approach:

• Considers ESG as part of risk management, alongside financial analysis, when investing with counterparties – this supports our goal to deliver returns during times of stress
• Doesn’t make cash investments in any company which generates more than 10% of its revenue from tobacco, armaments or fossil fuel extraction.