Phoenix Group has written to its asset management partners to outline the steps that it has been taking for its transition to net zero and to set the future direction of travel and expectations of its partners.
Building a sustainable future together
As the UK’s largest long-term savings and retirement business, Phoenix is committed to making a positive contribution to society for the benefit of all stakeholders, in line with our purpose of helping people secure a life of possibilities. In this context, one of the areas we can have the biggest impact is through responsible investment.
We are writing to you to outline the measures that Phoenix is taking, the commitments we have made, and what we expect of our investment partners. We strongly believe that by fully integrating environmental, social and governance (“ESG”) considerations into how we do business, we are collectively well positioned to drive change.
Phoenix is a front-runner in tackling climate change
Phoenix was among the first insurers in the UK to make a clear commitment to help tackle climate change in line with science-based targets. We’ve set a target of making sure we are net-zero carbon in:
- our operations by 2025
- our investment portfolios by 2050
The impact of climate change is one of the biggest global issues and we are therefore supporting the goals of the Paris Agreement. We are committed to the need to improve corporate disclosures on climate change. Last year we signed up to the Task Force on Climate-Related Financial Disclosures (“TCFD”) recommendations and we are currently working to strengthen our 2020 reporting. We are also reporting to Carbon Disclosure Project (“CDP”) annually, reporting for the first time last year. We are one of the strategic partners for Green Horizon Summit @ COP 26, which will bring green finance leaders and key stakeholders together to explore how to unlock capital to realise the goals of the Paris Agreement.
Businesses need to act responsibly
The existential threat of climate change, the global pandemic and broader societal inequalities have all sharpened the focus on the need for businesses to act responsibly. By truly integrating ESG considerations into the investment decision-making process, investors can drive more sustainable outcomes, improve the resilience of their portfolios while also maintaining, or indeed improving, their financial returns.
At the time of writing, we are the largest asset owner signatory to the United Nations Principle for Responsible Investment in the UK and we are committed to using our position to integrate sustainability into every aspect of the value chain. This means we want to influence sustainable change directly, through the assets managed on our behalf by asset management partners we have selected and also through market participants such as banks, brokers, consultants whom we partner with for illiquid asset origination and other investment activities.
We’d like to take the opportunity to tell you more about our responsible investment priorities and what we
expect of our investment partners.
Our ESG investment focus
Phoenix is making strong progress in comprehensively integrating ESG considerations into its end-to-end investment strategy, risk management and governance processes. This includes increased focus on ESG within our governance committees, the creation of the Board Sustainability Committee and through embedding ESG and climate data into our data platforms.
- Sustainable investments
We are committed to increasing the share of sustainable investments in our portfolios across both our Heritage and Open businesses. We will require our investment partners to play an integral role in helping us to meet our sustainable investment objectives across all asset classes. Sustainable investments, including our investment in illiquid assets, are core components of our growth strategy and are key priorities for our asset management business.
Firstly, we are targeting at least 60% of the illiquid assets that we originate to back our annuities business in 2021 to be sustainable.
Secondly, within our workplace pensions business, our Standard Life customer surveys continue to show a clear desire from customers to invest in a responsible way. In our 2020 survey,
- 65% of customers believe it’s important to invest in a way that drives positive change
- 89% agreed that protecting the environment is important
In response, we launched our sustainable multi asset default for workplace pensions and we are evolving our sustainable offerings. Looking forward, sustainability will be central to our ambition to grow our workplace pensions business.
- Climate change
Our ‘net-zero investment strategy’ includes reducing the emissions of our investment portfolios in a way that is consistent with achieving our net-zero goal by 2050, engaging with investee companies to transition businesses to lower-carbon models and investing in climate solutions. We’re baselining the carbon emissions of our investment portfolios and will be setting interim decarbonisation targets.