Legal & General’s (L&G) master trust has published a new sustainability report, which for the first time analyses sector-level nature-related dependencies at the request of its trustees.
The report, which is the first of its kind in the master trust sector, has expanded the scope of the board’s Task Force on Climate-related Financial Disclosures (TCFD) requirements by incorporating disclosures on nature and people.
As a result, the report formally recognises the links that climate change has with nature and biodiversity loss, as well as people and society.
“The interdependencies between climate, nature and people are of critical importance. A changing climate threatens natural ecosystems, and nature loss amplifies climate change by reducing the ability of ecosystems to store carbon,” said Tegs Harding, chair of L&G Mastertrust’s investment committee.
“These factors equally play out in the social sphere. Challenges such as income inequality, access to the living wage and human rights not only make it harder for us to address climate and nature issues – they exacerbate them,” she added.
Nature and people
In order to identify sectors with the highest impacts and dependencies on nature, L&G conducted a sector assessment using an open-access tool created by Global Canopy, the UN Environment Programme Finance Initiative (UNEP FI) and the UN Environment Programme World Conservation Monitoring Centre (UNEP-WCMC).
The report focused on the enabling conditions required for nature to be restored, based on five underlying direct drivers of biodiversity loss.
These include land, water, and sea use change, resource exploitation, climate change, pollution, and invasive alien species.
The report also explores nature-related risks by examining the risks 10 key sectors are exposed to. In particular, it examines the way that sustainability-related shocks could impact people’s retirement.
In addition to nature-related risks, the trustees are also reviewing recommendations to incorporate these into future sustainability reports, following the launch of the Taskforce on Inequality and Social-related Financial Disclosures (TISFD) in September 2024.
Climate
Furthermore, the £28.9bn master trust claims that all of its default funds have surpassed their 2025 decarbonisation pathway plan to reduce carbon emissions, with the Target Date Funds also at, or ahead of, their 2030 goals.
This included introducing a ‘no new coal’ policy which added companies that are expanding their thermal coal mining and/or power generation capacity to the Future World Protection List, L&G’s exclusion criteria used across all Future World funds.
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