The UK’s largest asset manager, Legal & General Investment Management (LGIM), in 2024 has engaged with more companies on climate issues than it did before, introduced baseline expectations for three sectors and added two companies to its divestment list, according to its Climate Impact Pledge (CIP) report.

The pledge, LGIM’s annual engagement programme, which aims to encourage companies to play their part in achieving the goals of the Paris agreement, also stated that during the 2024 proxy season, the asset manager engaged with over 2,800 companies on climate – more than ever before – and that exclusions in its funds represent almost £176 billion (US$222.67 billion) of assets.

The company, the report notes, also engaged directly with over 100 dial-mover companies (large companies it has identified as having the potential to galvanize action in their sectors); and it may apply voting sanctions against 37 of these companies, down from 43 in 2023.

During the 2024 proxy season, 455 companies were subject to voting sanctions. Of these, 106 were companies in emission-intensive sectors that did not meet the company’s new baseline expectations.

The sectors with the highest proportion of companies that failed to meet the company’s minimum standards were oil and gas, electric utilities, and property.

Between 2023 and 2024, the report notes that there was an upward trend in average CIP ratings across most markets, except in China and the US. Overall, significant improvements were observed since 2023 in climate disclosure and Scope 3 reporting (+41%), followed by net-zero ambition (+38%).

The asset manager, the report points out, co-filed a shareholder resolution at Nippon Steel, its first in Japan, due to insufficient climate-related lobbying disclosures.

As well, LGIM has made some changes to its climate voting policy by shining a spotlight on companies’ methane emissions disclosure and new investments in thermal coal.

Finally, from 2024, the asset manager will divest from an additional two companies – TJX and Glencore – for failing to meet its expectations. It is also keeping 14 companies on its divestment list from previous years, with some companies, such as Loblaw, Invitation Homes and COSCO Shipping Holdings, having demonstrated progress.

“I have been encouraged by progress over the last 12 months, with many of the companies with which we have engaged making significant strides in important areas,” shares Michelle Scrimgeour, the company’s CEO. “However, it is clear that the pace of the transition is neither smooth enough nor fast enough.

“It is not the role of the asset management industry alone to tackle climate change: this is a whole of system transition, the pace of which is influenced by global public policy, regulatory standards and the nature of energy demand. Therefore, radical collaboration is key to driving aligned action and decarbonization on a global scale.”