Our responsible investment approach
To help us make sure that our customers' money is being invested responsibly, we focus on four key areas. We believe this approach also enables us to actively influence the transition to a more sustainable world.
Here’s how we put our responsibility into action:
Stewardship and voting
We ask our asset managers to vote on our behalf to reflect our voting principles.
Advocacy and engagement
We use our position as a shareholder to positively influence the behaviour of the companies we invest in.
We integrate environmental, social and governance factors into our investment decision making processes.
We actively manage where we invest our customer’s money – so we can adjust our exposure to companies with large carbon footprints or poor social practices, within our Governed Range.
Responsible investment - how we look at the bigger picture
At Royal London we are committed to be a Responsible Investor.
And that means looking at the bigger picture.
It’s about looking at Environmental, Social and Governance factors, or ‘ESG’ for short.
For example, we might look at a company’s position on environmental responsibility, cyber security, or boardroom diversity.
As part of this commitment, we’re asking all our asset managers to consider financially material ESG risks and opportunities when they make investment decisions.
And to be good stewards by voting and engaging with companies to improve the way they’re run.
We fully expect all asset managers who we choose to work with to be putting these principles into place.
To us, Responsible Investing isn’t about choosing values over value - it’s about managing risk, making better investment decisions, and generating better long-term results for our customers.
How we practice Responsible Investment
We believe our asset managers are best placed to understand the importance and impact of ESG factors across our investments in order to help improve customer outcomes.
Our role is to pick the asset managers we believe are best aligned with our investment principles. We believe deciding not only how we invest but who we choose to work with puts us in the best position to do what’s right for our customers.
- Responsible selection - Before we appoint an asset manager, we’ll carry out a responsible investment assessment at the screening stage to make sure they meet the best practice standards we have in place.
- Appointment - We’ll make sure all our Responsible Investment principles are known to all our asset managers, and we’ll only choose to work with the ones who are already working on putting these principles into practice.
- Monitoring and reporting - We’ll ask asset managers to provide regular updates and reports on their progress. If we find they’re not reaching the standards we expect, we may decide to stop working with them.
Shareholder Rights Directive II (SRD II)
We invest £150bn* on behalf of our customers, of which around a third is invested in the shares of listed companies (equity investments). The proportion of equity held in each investment strategy depends on the product. Our with profits products provides additional guarantees and smoothing, more detail on these products and their investment strategy can be found in the Principles and Practices of Financial Management.
We’re committed to being a responsible investor. This means that good stewardship is hugely important to us, as is choosing the right asset managers to make investment decisions on our behalf. You can find out more in our Stewardship and Engagement policy. We work with our primary asset manager Royal London Asset Management (RLAM) to exercise our stewardship responsibilities. Read more about RLAM’s approach to Responsible Investment.
*as at 30 June 2022
We exclude cluster munitions, anti-personnel landmines, and biological and chemical weapons based on guidance from the following international conventions and treaties:
- The Biological Weapons Convention 1975, prohibits the development, production and stockpiling of bacteriological (biological) and toxin weapons
- The Anti-Personnel Mines Treaty 1997, also known as the Ottawa Convention, prohibits the use, stockpiling, production and transfer of anti-personnel mines
- The Chemical Weapons Convention 1997, prohibits the development, production, stockpiling and use of chemical weapons
- The Convention on Cluster Munitions 2008, prohibits the use, production and transfer of cluster munitions
No fund will knowingly invest in corporate equity and/or debt involved in the manufacture of cluster munitions, anti-personnel landmines, or biological and chemical weapons.
What this means for your clients
Ultimately, responsible investing is not about choosing values over value, but how we can integrate both to deliver long-term investment returns. Remember prices can fall as well as rise meaning your clients may not get back the full amount of capital they originally invested.
By combining the skills of our asset managers and considering the ESG impacts of all our investments, we aim to provide better outcomes for our customers and your clients while working towards making businesses, society and the environment stronger for the future.
We’ll provide updates on our responsible investment activity in our Annual Report, and we’ll update our website with news on an ongoing basis.