On the go: Scottish Widows is to divest £440m from companies that failed to meets its environmental, social and governance standards.
The move, claimed to be the most extensive exclusion policy ever practised by a major pensions provider, is intended to protect 6m customers from ESG-related risk, Scottish Widows said.
The policy covers Scottish Widows’ investment, life and pension funds, whether they be actively managed or index trackers, and its flagship workplace default fund, and will also apply to portfolios it invests in to meet insurance policies. Plans are in place to extend this to external pooled funds offered by the company.
Under the policy, the company will exclude any business that derives more than 10 per cent of its revenue from thermal coal or tar sands, as well as the manufacturing of controversial weapons, and businesses that violate the UN Global Compact on human rights, labour, environmental standards and corruption.
However, an exemption exists where “the size and type of investment means that the insurer can influence positive change in their business models”, Scottish Widows said.
Commenting on the move, head of pension investments Maria Nazarova-Doyle said: “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.
“Our exclusions focus on companies we believe pose the most severe investment risk due to the nature of their businesses, which can’t be addressed through engagement.”
Ms Nazarova-Doyle added that the growth of these “at risk” companies is likely to be limited by regulations in future, while the changing views of customers and investors may result in significant falls in their share prices.
“We’ve worked hard to implement our exclusions across our fund range without limiting this initiative to our actively managed funds. We’re excluding investments from the index trackers that underpin our flagship multi-asset funds too,” she said.
“We recognise there’s more we can do as a company and that this is just one step in the journey. However, this underlines our commitment to becoming a market leader in responsible investment and to make a real difference.”
