"Large-scale challenges we are facing today, such as climate change, make our role even more important."
The framework provides greater transparency on how the insurer will develop its investment fund range, helping address the material financial risks and opportunities linked to Environmental, Social and Governance (ESG) issues. It will help shape decisions on asset allocation, manager selection, fund research and engagement activity.
Made up of six principles of responsible investment, the framework includes implementing exclusions across funds managed and mandated by Scottish Widows, such as its workplace pension default funds; reducing the carbon intensity of their equity exposure; and developing a broader range that enables customers to support causes close to their hearts.
With the aim of extending these principles to all asset classes over time, the team will work with policymakers and the industry to promote direct investment opportunities required to successfully transition to a lower-carbon economy.
The framework also outlines the insurer’s stewardship approach to influence positive change among companies that are failing to address climate change risks. It will also enhance the existing strong governance of fund manager partners to deliver better investment outcomes for customers.
Outgoing Bank of England governor Mark Carney has cautioned that the financial system is currently funding an increase in global temperatures of more than 4C. Incoming governor Andrew Bailey, who will take over from Carney on 16 March, has been urged to "lead the way” in aligning finance with the 1.5C target aimed for in the Paris Agreement.
A letter signed by over 100 economists, scientists and industry leaders has called on Bailey to introduce mandatory disclosure on climate risks, to penalise high-carbon lending, and to decarbonise monetary policy by excluding fossil fuel assets from future rounds of quantitative easing.
Maria Nazarova-Doyle, head of pension investments at Scottish Widows, said: “Our role is to keep our customers’ money safe and help them plan for their financial future. Large-scale challenges we are facing today, such as climate change, make our role even more important. We must aim to deliver the best possible retirement outcomes for our customers, and that’s at the heart of our responsible investment approach.
“As the industry focus on responsible investment grows, so does our customers’ interest in investing more sustainably. To continue delivering competitive returns for our customers, we must fully embrace responsible investment practices, which will allow us not only to manage risks and returns in a more effective way in the funds that we offer, but also empower customers to invest their savings in a way that reflects their values.”
