Taking action to create a low-carbon economy
Climate change carries significant financial risks, so protecting the planet and protecting our clients’ investments go hand-in-hand.
Meryam Omi, Head of Sustainability and Responsible Investment Strategy, 2019
Climate change is huge, that is not a tail risk, it’s a top risk,”
Nigel Wilson, CEO, Legal & General Group
Taking action to create a low-carbon future
We recognise the seriousness of the climate crisis. We're a very long-term business, with commitments to pay customers and their families sometimes for 50 years or more. So we want to ensure that the environment supports communities and businesses throughout this century and beyond.
According to the Intergovernmental Panel on Climate Change (IPCC) even 2°C of warming above pre-industrial levels would mean catastrophic flooding, drought and associated mass-migration, food scarcity and large scale loss of biodiversity and overall worsening living conditions. These changes will impact global economies, markets, companies and people.
The science behind climate change is well developed. The link between greenhouse gas (GHG) emissions and increasing temperatures is clear and generally accepted. The global average temperature has already risen by 1°C since the pre-industrial era and is expected to continue to increase over this century. We all have a narrow window of opportunity to halt the disturbing rise in global temperatures that we have been experiencing.
We support the aim of the Paris Agreement to limit the global average temperature rise to well below 2°C of pre- industrial levels
What we're doing
- As part of our Climate Impact Pledge we continued to assess and engage with organisations to encourage climate resilience. Certain companies which failed to meet minimum thresholds were placed on a ‘no investment’ list. In 2018, eight global Companies were removed.
- We're using our influence as a large investor to promote a transition to a low carbon economy
- We have developed low carbon, energy efficient homes in our housing business
- We continued to invest in renewables such as onshore windfarms, solar photovoltaics and digital software solutions for the energy grid. We have deployed more than £1 billion in renewable energy infrastructure.
- We're seeking to reduce the carbon footprint of our own business activities
Task Force on Climate-related Financial Disclosures
As a signatory to the Task Force on Climate-related Financial Disclosures we’re fully committed to disclosing our approach to the risks and opportunities presented by climate change
Overall responsibility for climate change and environmental performance is held by the Group CEO, Nigel Wilson and responsibility for consideration of group market risk connected to our investments (including the risk of climate change) is held by the Group CFO, Jeff Davies, who is also a Board member. Under their stewardship we have produced two TCFD reports that outline our governance, risks and opportunities as well as stating our carbon footprint.
1. The first report supports our group strategy through the positioning of our own investments. We have set a strategy for decarbonising our balance sheet traded assets, moving away from high-carbon investments and into low carbon. We recognise the opportunity presented by the energy transition and are funding developers of clean energy solutions with potential to be disruptive on a global scale.
2. The second report focuses upon Legal & General Investment Management's (LGIM's) asset management strategy. LGIM is a major global institutional investor and has established a climate engagement programme aimed at some of the world’s largest companies: ‘the Climate Impact Pledge’, leading to voting and investment decisions.
Investing in renewable energy
We have deployed more than £1 billion in renewable energy infrastructure and expect to continue deploying into renewable energy and power grid infrastructure. We invest long-term capital into the energy sector to accelerate the progress to a low-cost, low-carbon economy, also reducing the cost of power for consumers. This includes renewable wind and solar power generation, energy-efficient houses and buildings and innovative technologies to control, manage and store energy.
The Hornsea Project One financing will enable the construction of what will become, once operational, the world’s largest offshore windfarm project, powering over one million homes. It will be located 100 km off the north-east coast of Britain, with 174 UK built Siemens turbines. In 2018, we also entered into a joint venture in Dudgeon Offshore Wind Ltd, located off the east coast of England, producing enough electricity to power 410,000 homess and innovative technologies to control, manage and store energy.
We're actively engaged in assessing investment opportunities to support the electrification of transport and reduction of greenhouse gas (GHG) emissions due to heating in homes and offices. We have invested in ‘Pod Point’, which provides EV charging units and management software to households as well as to companies wanting to provide EV charging capability for their customers, visitors or employees.
We aim to build highly efficient, near-zero carbon, homes, not only to meet government policy targets but also to meet growing consumer demands. To ensure that our Homes businesses are part of this solution we have a target to develop low-carbon, energy efficient homes in our housing businesses.
We construct new homes to meet the latest standards contained within the Building Regulations, in line with government policy on low-carbon homes, such as including solar PV, solar thermal, air-source heating and shower save. This delivers long-term carbon reductions and homes that are cheaper to run.
Reducing our carbon footprint
We have undertaken a strategic review of our carbon risks and opportunities. We have regularly managed and reported on our Scope 1 and 2 emissions and our business travel Scope 3 emissions. Full details of these emissions are found in our annual report on page 236 and in the data tables.
In 2018, our total greenhouse gas emissions increased from approximately 45,000 tonnes of CO2 emissions (tCO2e) to around 49,000 tonnes (tCO2e), as a direct result of our growing housing businesses. For example, our newly acquired CALA Homes business emissions corresponded to 6,600 tCO2e. In fact the energy used in our UK occupied offices to run our businesses fell by 17% between 2017 and 2018.
In 2018, the carbon emission intensity of the balance sheet was 370.22 tonnes CO2e/£1m invested. This was down 24% from the previous year. When applied to the £69 billion of equity, bonds and property components of the investment portfolio to which shareholders are directly exposed, this gives a carbon footprint of 26 million tonnes of CO2 emissions.
Action to reduce plastic usage
We acknowledge that we have a long way to go to meet our own demanding standards in reducing plastic usage in our offices and in the premises and buildings of the companies we own and invest into. In 2018, we made a tentative start by reducing some plastic usage in catering facilities in our offices. During 2019, we are working with suppliers to ensure that we continue to remove plastics.
Action to reduce waste and water usage
Up to the end of 2018 we have reduced office water consumption per policy by 46% against our 2013 baseline.
We originally had a target to reduce total waste generation per policy by 25% based on our 2013 baseline. However, our waste per policy has increased from 102 grams to 1,305 grams. This increase is due to our new construction businesses, which represent 95% of group waste.