An ethical investment operation by the UK’s largest asset manager has dumped shares in a string of US companies it has deemed climate crisis laggards, including oil giant ExxonMobil and insurer Metlife.
Legal and General Investment Management (LGIM) said it had cut five companies – ExxonMobil, Metlife, Spam maker Hormel Foods, US retailer Kroger and Korean Electric Power Corporation – from its umbrella of ethical investment funds worth a total of £5bn.
LGIM added the climate laggards to a list which already includes China Construction Bank, carmaker Subaru, Japan Post Holdings, Canadian retailer Loblaw, US food and service conglomerate Sysco Corporation and Russian oil giant Rosneft, which is part-owned by BP.
The asset manager monitors companies across six major sectors: oil and gas; mining; electric utilities; carmakers; food retailers; and finance.
Meryam Omi, head of responsible investment at LGIM, said investor engagement with companies can be “a powerful tool” if there are “consequences”. L&G retains shareholdings in the blacklisted companies at other funds in its £1tn investment empire and will now use those shares to vote against board appointments at the named and shamed businesses.
“Talks without action are no longer fit for purpose given the urgency to address climate change,” she said. “This is no fad. The world is truly in the midst of a climate emergency, which could have drastic consequences for markets, companies and, therefore, our clients’ assets.”
LGIM expects all companies to disclose their exposure to the climate crisis and set targets for reducing the carbon-intensity of their operations as part of its 2016 climate impact pledge. The investment firm warned earlier this year that the world is facing “a climate catastrophe” unless companies act, and last year said it voted against a record number of boards which are not doing enough.
Omi said the investor is doing “a huge amount” to urge clients to follow the example of its ethical funds by divesting from carbon-intensive companies to protect against the financial risk of climate breakdown.
She said there is also a “powerful opportunity” for investors which remain shareholders of polluting companies to use their voting power to help change the organisation.
The money manager said US companies have proved the most challenging to engage with on climate concerns. LGIM said the nation is divided between companies firmly committed to tackling climate issues, and a disproportionate number of companies among the lowest-scoring of its report.
Donald Trump has vowed to pull out of the Paris climate agreement, in contrast to many US states and cities which are making strides in holding fossil fuel companies to account for the climate crisis. Overall, LGIM believes there is less willingness among US companies to make even incremental changes because they are not under the same pressure to take climate action because it is not expected by US investors.
ExxonMobil, the world’s largest listed oil company, emerged as the leading climate laggard in this year’s tally after refusing to report its own carbon emissions or set targets to reduce them. Omi said these measures are the minimum LGIM would like to see from a company “with a huge footprint”.
Meanwhile, LGIM praised US oil company Occidental Petroleum which was reinstated as an investment candidate after landing on the laggard list last year. The report said Occidental has shown “a step change” in its climate engagement by measuring and disclosing its total carbon emissions and announcing plans to set emissions targets by the end of the year. Occidental also plans to spend $36bn (£32bn) to buy a shale oil company, Anadarko, in one of the largest US shale deals of recent years.
LGIM said it plans to escalate its climate criteria in the years ahead.
