LGIM aiming for net zero by 2050 with new equity strategy

Legal & General Investment Management (LGIM) aims to “significantly reduce” its exposure to carbon emissions in alignment with 2050 net-zero goals by formulating a climate-tilted index equity strategy with LCP.

The LGIM Low Carbon Transition Index Equity Fund range will leverage LGIM’s climate scoring framework and reduce initial exposure to carbon-emitting assets by 70 per cent compared to the broad market capitalisation benchmark, with funds also having significantly lower exposure to fossil fuel reserves and higher exposure to companies with green revenues.

LCP explained that, while it was aiming to achieve further reductions in exposure to carbon emissions over time, its ultimate objective was to align with net-zero emissions globally by 2050 to line up with the Paris Agreement.

The strategy itself will be launched in LGIM’s life wrapped pensions management vehicle with both regional and global variants being made available.

LCP head of responsible investment, Claire Jones, commented that the fund range “enables pension schemes to manage their climate risk exposure by investing in low-cost equity funds that combine a large reduction in carbon intensity on day one, a commitment to reduce that intensity further over time, and strong stewardship".

LGIM senior index distribution manager, Stefan Jean-Luc Bilby, said: "Addressing climate-related concerns is of paramount importance to our clients given growing regulatory pressures and the global shift towards net zero.

“We are thrilled to have launched the Low Carbon Transition Fund range; it offers investors an effective means to mitigate their climate risks using an innovative index approach."

LGIM head of institutional clients, Mark Johnson, added: "The new Pension Schemes Act will catalyse action for trustees to address global greenhouse gas emissions. By holding companies to account on their progress towards net zero and rewarding those which do via capital allocation, the Low Carbon Transition Funds can support our clients as they begin the journey to decarbonise their portfolios."

LCP also launched a new report, Aligning the Stars: Asset owners and energy investment toward Net Zero, which estimated that the energy sector could develop investible assets of £350bn over the next 30 years, equal to £12bn per year, every year, until 2050.

It found that a 'business as usual' scenario would see asset owners expending their infrastructure investments over the next 10 years to £70bn, leaving a "funding gap" of around £100bn.

If UK asset owners increased their exposure alongside global asset owners and the government, up to £125bn could be invested over the next decade and £305bn by 2050.

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