Pensions provider Scottish Widows has announced it will pull millions from companies failing to meet its ESG standards.
The £440m divestment from companies that “pose significant ESG” risk is the firm’s latest sustainable push, and is one of the largest exclusions policy by an institutional investor yet.
The divestment seeks to protect almost 6m customers from ESG-related investment risks, with the exclusions being applied across the group’s life, pension and OEIC funds.
The new exclusions policy targets companies which derive more than 10 per cent of their revenue from thermal coal and tar sands, manufacturers of controversial weapons and violators of the UN Global Compact on human rights, labour, environment and corruption.
And Scottish Widows warned the divestment figure could grow if companies fail to take further action on the sustainability of their business.
ESG has been a hot topic in recent years, not least for pension schemes, and consumer demand for sustainable investments is growing. Pension providers have come under serious pressure from campaigners about the nature of their investments, from fossil fuels to tobacco.
Film director Richard Curtis this year launched the ‘Make My Money Matter’ campaign to raise awareness of non-ESG compliant funds, pushing for sustainable alternatives.
In September the campaign partnered with WWF to call on the finance sector to “urgently” address its role in tackling the climate crisis.
“As a large institutional investor, we have a vital role to play in shielding our customers from ESG investment risks, as well as influencing positive change through the investments we hold,” Maria Nazrova-Doyle, head of pension investments at Scottish Widows said.
“The growth of these ‘at risk’ companies is likely to be severely limited by future regulations and the changing views of customers and investors, leading to significant falls in their share prices.”
Scottish Widows’ divestment is the latest sustainability push from the pensions provider which in August announced it had collaborated with asset manager Blackrock to create a climate fund.
The Climate Transition World Equity fund has received £2bn of Scottish Widows’ pension portfolios as it looks to offer customers “more sustainable investment choices”.