Royal London Asset Management
Royal London Asset Management is a UK-based investment management firm with 5 offices across the United Kingdom and Ireland. It joined the Net Zero Asset Managers Initiative on 29 March 2021 and its initial target disclosure was published on 1 May 2022.
71% of total AUM
initially committed to be managed in line with net zero
USD $146 billion
currently committed to be managed in line with net zero
Information on interim target(s) covering the proportion of assets to be managed in line with net zero
Portfolio decarbonisation reference baseline
For corporate fixed income and equities (2020 baseline*) – Scope 1 and 2 emissions intensity: 45.2 tCO2e/$mn
For property (2019 baseline) – operational emissions: 51,704 tCO2e, embodied carbon emissions: 11,353 tCO2e
Metrics for monitoring – absolute Scope 1 and 2 financed emissions: 3,24 M tCO2e, Weighted Average Carbon Intensity Scope 1 and 2: 98.5 tCO2e/$mn sales, Scope 3 emissions intensity (estimated): 337 tCO2e/$mn invested, absolute scope 3 financed emissions (estimated): 24,20 M tCO2e
*Baseline year performance metrics for equities and corporate fixed income is calculated using Enterprise Value Including Cash, in line with PCAF recommendations. The figure currently excludes private corporate credit due to methodological constraints.
Portfolio decarbonisation reference target
We aim for a 50% reduction of tCO2e/$mn invested from a 2020 baseline.
Engagement threshold target
Our objective is to evaluate and/or influence through engagement companies representing 70% of RLAM’s corporate financed emissions to adopt emissions reductions targets linked to science-based sector-specific alignment methodologies (such as SBTi or other similar initiatives) and climate transition plans.
Portfolio coverage target
Property emissions – net zero for directly managed property assets by 2030
Portfolio coverage target
Property emissions – net zero for indirectly managed property assets by 2040.
GHG scopes included:
Equities and corporate fixed income: Scope 1 and 2 reported and estimated emissions (2020) = 86.4%
Financed Scope 1 and 2 emissions – EVIC based (2020) = 67.8%
Financed Scope 3 emissions – EVIC based (2020) = 67.7%
Property portfolio: Operational and embodied carbon emissions = 100%
As % value of equities, fixed income and property in overall AUM not ‘net zero in scope’ sub-set. The coverage reduction from 86.4% to 67.8% reflects limitations in EVIC coverage, only available for publicly listed companies. We follow PCAF to measure private corporate debt and may disclose as a separate baseline as we gain methodological confidence. Emissions data is the latest available from our portfolio at 31/12/20. In practice, this means the majority of emissions are from company operations in FY19.
Net Zero Investment Framework
Our approach is informed by the IPCC special report on global warming of 1.5°C and the IPCC AR6. We aspire to follow a trajectory aligned with 1.5°C with low or limited overshoot, broadly equivalent to IPCC scenarios ‘SSP1-1.9’ or ‘SSP2- 2.6’. For a sectoral breakdown of the pathways, we aim to use International Energy Agency Net Zero and Central Banks’ Network for Greening the Financial System (NGFS) scenarios.
Proportion of AUM committed:
Includes: Funds/assets directly owned or controlled by RLAM and segregated mandates where clients made explicit commitments to net zero. Excludes: Funds/assets that, due to mandate, or presently unclear pathway to net zero by 2050. Funds tracking external indexes, from which we do not have control and assets with insufficient data to make a commitment at this time. This may include emerging markets, commodities, derivatives, cash, and foreign exchange.
Policy on coal and other fossil fuel investments:
We are favour actions that deliver positive impact in the real economy. Therefore, we prioritise engagement over divestment of high emissions assets. We will continue evaluating policy and technological developments, trends and actions that support demand reductions. We are evaluating best practice to avoid unintended consequences and maximise real economy benefits. While we evaluate portfolio decarbonisation for risk minimisation, we will continue evolving our understanding of the impact of engagement vs divestment on real emissions rather than exclusively on portfolio decarbonisation.
To give our clients choice, a number of our funds have explicit fossil fuels exclusions e.g. Bond ICVC funds, Ethical bond fund and Sustainable funds range.
Target setting: Sovereign bond funds are included in our net zero commitments although their emissions have not been captured in the emissions baseline. This asset class was covered by PCAF November 2021 consultation, and we expect methodologies to evaluate alignment with the Paris goals to follow.
We hope regulatory efforts, innovation, methodology convergence and additional voluntary disclosure will support our development of additional approaches to include other asset classes into our net zero targets. We are keen to find ways to use our entire AUM to support faster decarbonisation.