At Scottish Widows, we recognise that environmental, social and governance factors such as climate change are some of the biggest issues facing society today. As part of Lloyds Banking Group, we can make a real difference to tackling these challenges by helping to finance a greener and more prosperous future together. We believe this will require new ways of living, working and investing for our business and our customers. As a Group, we have recently set ourselves an ambitious goal to accelerate working with customers, government and the market to help reduce the carbon emissions we finance by more than 50% by 2030 – the estimated equivalent of removing the emissions produced by almost a quarter of UK homes.1
There is an urgent need to transition to a low-carbon future, grow the green economy and tackle inequalities for the future prosperity of the UK. The Global Commission on the Economy & Climate has estimated that over the next 15 years, approximately $93 trillion will be needed for investment in low-carbon infrastructure across the world in order to meet global targets.2 Whilst we don’t have all the answers today, we are committed to making progress across the breadth of our operations. For example, through Lex Autolease, we have one of the UK’s largest ultra-low emission vehicle fleet, with more than 21,000 ultra-low emission vehicles.3 Also through our £2bn Clean Growth Finance initiative, we offer discounted finance to Commercial Banking clients investing in a lower carbon future. Through this initiative Lloyds Bank and Scottish Widows have provided collective funding of £273m for the world’s biggest offshore wind farm, Hornsea Project One.4
Scottish Widows’ responsible investment approach
Through parent company Lloyds Banking Group, Scottish Widows is a signatory to the UN Principles for Responsible Investment and the Institutional Investors Group on Climate Change (IIGCC). Through our work with IIGCC we encourage the adoption of public policy solutions to ensure an orderly transition
towards a low-carbon economy, and also help encourage and inform investment practices aimed at preserving and enhancing long-term investment value.
As a leading pension provider in the UK, Scottish Widows are looking after the retirement savings of millions of hard-working people. Given the nature of the products we offer, our goal is to secure financial futures for our customers and it is therefore imperative that we understand the financial implications of environmental, social and governance issues. Where we believe these factors pose downside risk to investments or offer potential upside opportunities, we will incorporate them into our investment decision making.
Better stewardship leads to better long-term investment outcomes
We believe that effective stewardship drives better long-term investment returns for our customers. Our scale and expertise give us the potential to positively influence investee companies to make value enhancing changes. We work with companies to influence their strategy and approach, liaising with management and voting on resolutions, with a clear focus on enhancing a company’s approach to meet the challenges of a transition to a lower carbon economy. Where we have delegated responsibilities to external fund managers, we expect them to undertake active ownership on our account, through exercising voting rights and working with company boards.
Our commitment to Helping Britain Prosper
Using the expertise we have across Lloyds Banking Group, we are actively engaged in unlocking further investment in support of the transition to a low-carbon economy – which we believe will lead to delivering stable, long-term sustainable returns for our customers. We currently lend more than £7 billion from our growing annuity fund to support housing, higher education, sustainable energy and infrastructure projects.5
It is also important to us that we practice what we preach. Therefore we are looking at ways of improving our own sustainability practices for the benefit of our customers and shareholders and to continue to build a future worth living in.
We recognise we must go further and continue to challenge ourselves. Our customers look to us to exercise our judgement on the most appropriate way of investing over the long term, particularly on our pension defaults, and we are committed to delivering the best outcomes. We will look to enhance our collaboration, both with investee companies and across the industry. We will also aim to offer a wide range of funds to allow customers to align their investments with their beliefs.
To learn more about the Scottish Widows approach to responsible investing, visit scottishwidows.co.uk
Sources: 1Ministry of Housing, 2017. 2Global Commission on the Economy & Climate, 2014. 3Lex Autolease, Feb 2020. 4Lloyds Banking Group, Feb 2020. 5Lloyds Banking Group, Feb 2020.