Fund Size: £226.60

Total screened & themed / SRI assets: £332200.00

Total Responsible Ownership assets: £1195690.00

Total assets under management: £1195690.00

As at: 31/12/22

Sustainable, Responsible &/or ESG Policy:

The Legal & General Future World Climate Change Equity Factors Index Fund targets better risk-adjusted equity returns than a traditional index strategy by incorporating ’factors’ into index design, while also seeking to address the investment risks associated with climate change. We do this by incorporating investment ‘factors’ into index design, which are any characteristics relating a group of assets that help to explain their risk and return. Some of the factors, such as ‘value’ or ‘quality,’ will probably be familiar to investors as popular investment styles in equity investing. We also apply a ‘climate tilt’ in the fund strategy. The tilt allows us to increase exposure to companies generating revenue from the low-carbon economy and reduce exposure to companies that are failing to adapt, while still maintaining broad exposure to the sector and thus remaining diversified.

The objective of the Fund is to track the performance of the FTSE AllWorld ex CW Climate Balanced Factor Index (the "Benchmark Index") on a net total return basis before fees and expenses are applied. Therefore, the Fund’s performance may differ from the Benchmark Index due to the deduction of fees and expenses and the impact of any tracking error factors. The methodology of the Benchmark Index is designed to reflect the performance of a global and diversified basket of shares in companies where their weights are varied (i) to achieve balanced exposures to value, quality, low volatility and size factors and (ii) to account for risks and opportunities associated with climate change.

In alignment with LGIM’s Climate Impact Pledge (CIP), the fund applies the Future World Protection List, which has been specifically developed for our Future World fund range.

Companies are incorporated into the list if they fail to meet minimum standards of globally accepted business practices. Across the LGIM-designed Future World funds, securities issued by such companies will not be held or exposure to them will be significantly reduced. The Future World Protection List includes companies which meet any of the following criteria:

• Involvement in the manufacture and production of controversial weapons
• Perennial violators of the United Nations Global Compact, an initiative to encourage businesses worldwide to adopt sustainable and socially responsible policies.
• Pure coal miners – companies solely involved in the extraction of coal.

Please note that the FWPL will be applied within the index. The fund’s objective is to replicate the performance of the benchmark index.

For further detail on the CIP, please visit this document: https://www.lgim.com/landg-assets/lgim/_document-library/responsible-investing/climate-impact-pledge-brochure-uk-eu.pdf/

Exclude companies that produce ‘controversial’ weapons: Cluster Munitions, Anti-Personnel Mines, chemical or biological weapons

The index methodology reduces exposure to companies that own or are engaged in the exploration or production of fossil fuels or the suppliers of equipment and services to the fossil fuel industry. Carbon Emissions The index methodology reduces exposure to companies that emit high levels of CO2 relative to other companies in the same ICB sector. Green Revenues The index methodology increases exposure to companies that produce goods, products and services that allow the world to adapt to, mitigate or remediate the impacts of climate change, resource depletion and environmental erosion

Climate Impact Pledge – Over the past five years, LGIM has championed a structured engagement campaign with consequences, which we call the Climate Impact Pledge (CIP). We have been widely recognised among industry watchdogs as being an industry leader on climate engagement. Through our campaign we have set out a transparent framework with a clear set of metrics for assessment. Those companies who have remained consistent laggards, we have voted against the chair across all our index equity pooled fund AUM and divested these companies within a selected number of our sustainable themed funds (over GBP 158bn AUM as at December 2022). This component is an additional step that is not currently built into the index methodology with divestment being made at the fund level subject to a 30bps TE budget vs the index.

Firmwide voting/engagement – As well as the targeted engagement within the CIP, we engage on behalf of all our clients’ assets, and represent all clients in carrying out voting, engagement and advocacy activities in order to protect and enhance asset values over the long term and speak with one voice in our discussions with companies.

We are globally recognised for being a long-term, constructive, collaborative and informed investor; therefore, companies from around the world actively seek out our opinion. Furthermore, LGIM regularly engages with a wide range of market participants to address ESG issues and raise standards. We support the development of regulatory/policy tools that enable the implementation of ESG principles. We actively collaborate with market participants, for example through our work with the Net Zero Asset Manager Initiative, the Paris Aligned Investment Initiative, COP26 Business Leaders, Glasgow Financial Alliance for Net Zero (GFANZ) and CA100+

Sustainable, Responsible &/or ESG Process:

The index methodology is designed to reflect the performance of a global and diversified basket of securities where their weights are varied to

• achieve balanced exposures to Value, Quality, Low Volatility and Size factors and
• to account for risks and opportunities associated with climate change.

The index excludes companies that produce ‘controversial’ weapons: Cluster Munitions, Anti-Personnel Mines, chemical or biological weapons.

The index methodology reduces exposure to companies that own or are engaged in the exploration or production of fossil fuels or the suppliers of equipment and services to the fossil fuel industry.

The index methodology reduces exposure to companies that emit high levels of CO2 relative to other companies in the same ICB sector.

The index methodology increases exposure to companies that produce goods, products and services that allow the world to adapt to, mitigate or remediate the impacts of climate change, resource depletion and environmental  erosion

Resources, Affiliations & Corporate Strategies

As of May 2023, there are a total of 88 LGIM employees with roles dedicated to ESG, some of which are outlined in more detail below.

Investment Stewardship team

• As Head of Investment Stewardship and Responsible Investment Integration, Michael Marks’ role spans all functions within LGIM from investment stewardship, distribution and investment teams to operational functions such as data and technology; embedding ESG across the firm in all areas and ensuring that focus is maintained on delivering the capabilities required by all stakeholders.
• The team is responsible for developing and carrying out LGIM’s investment stewardship and active ownership activities. The team comprises subject matter experts in all facets of ESG and is organised in a matrix of thematic and sector coverage.
• There are 251 people in our global Investment Stewardship team, led by Michael Marks. The team includes those located in the US and Japan, led by John Hoeppner and Trista Chen respectively.
• Trista joined LGIM in February 2023 as the Head of Investment Stewardship Asia (ex Japan) based in Singapore. This role is a key step in expanding LGIM’s presence in Asia, both strengthening and intensifying LGIM’s Investment Stewardship activities in the region as well as being a spokesperson for LGIM on ESG matters; thereby supporting and enhancing the awareness of LGIM’s brand.
• Alexander Burr, ESG Policy Lead, continues to lead and progress LGIM’s ESG policy engagement globally.

Responsible Investing Strategy team

• Amelia Tan joined LGIM at the start of 2022 as the Head of Responsible Investing Strategy for Investments. This role ensures that LGIM stays at the cutting edge of innovation within responsible investing and creates a coordinated approach across public asset classes, which is embedded throughout our funds and portfolios.
• The Responsible Investing Strategy team, comprised of three colleagues, works with investment teams to integrate responsible investing insights into investment process across asset classes and investment styles. Additionally, the team also looks to innovate on responsible investing products and solutions, with the focus on positioning and ensuring that we are market-leading, credible and consistent.

Climate Solutions team

• Nick Stansbury, Head of Climate Solutions, leads our energy transition approach and is one of our most prominent spokespeople on this topic.
• The Climate Solutions team, which has a total of five team members, have created a bespoke, detailed and investor-focused model to facilitate construction of fully independent energy scenarios. The framework uses in excess of 10 million data variables to model the energy system. The model, LGIM’s Destination@Risk, is now helping to inform our long-term investment decisions and develop dynamic pathways for the energy system.

Distribution

• Laura Brown, Head of Client and Sustainability Solutions, has overall responsibility for Client and Sustainability Solutions at LGIM bringing together our investment capabilities to design solutions to meet investment and sustainability objectives for a wide range of clients. Laura works closely with two further colleagues who are dedicated to ESG and supporting clients’ in meeting their sustainability and responsible investing objectives.

Real Assets

• LGIM’s Real Assets team has a team of seven dedicated ESG experts working across the range of private credit and real estate strategies that we manage. This team is led Shuen Chan.

Product Development and Strategy

• Rachel Ahlquist is focused on developing and shaping the strategic direction of the pooled product range with respect to Responsible Investment features. This includes specific focus on product launch or amendment work with more advanced ESG features.

ESG Programme

The LGIM ESG Programme has been running since 2020 and is aligned to LGIM purpose to create a better future through responsible investing. The ESG Programme has been deemed firm critical and necessary to transform the firm capabilities to meet client, industry and regulatory needs around responsible investing. Delivery in 2023 is focussed on strategically meeting mandatory regulatory obligations, and to further enhance and extend usage of ESG data sets and leverage central data mastering capabilities.

• During 2022 LGIM had three explicit projects undertaking ESG related work covering ESG exclusions, regulatory change, and data and reporting. The STOM (Strategic Target Operating Model) programme also will have impact across LGIM wide ESG capabilities, with its delivery starting in H2 2023.
• In 2023 all ESG project activity outside of STOM has been combined into a single programme with a priority focus to deliver the mandatory regulatory items first.
• In H1 2023 the programme remains focussed on deliverables for SFDR and TCFD regulation, given the Level 2 requirements of SFDR came in to force as of 1 January 2023. Significant project work is also underway to centralise data in the LGIM Data Marketplace and leverage the mastering capability for products, accounts, and securities.

Roles substantially contributing to our responsible investing capabilities

As of May 2023, we also have a further 70 colleagues across Investments whose roles have very substantial contribution to our responsible investing capabilities and whose objectives reflect this although their responsibilities are broader than solely ESG.

Investments

• Sonja Laud is Chief Investment Officer (CIO) at LGIM. She leads the firm’s investment team which spans trading as well as solutions, active fixed income, index, active equity, annuities and multi-asset businesses. Her remit covers all aspects of Investments from research analysis to portfolio construction, with a focus on leading LGIM’s responsible investment strategy.
• LGIM’s investment teams are responsible for integrating sustainability into portfolio outcomes. The below outlines the teams involved with the management of sustainable investment strategies.
• The Index team – has been managing FTSE4Good indices for nearly 20 years and were the chosen manager to collaborate with the Environment Agency and MSCI to launch a Low Carbon tracker in 2015. We were a pioneer in launching our ESG (Future World Fund range) and have run ESG factor strategies since 2017 and Climate Strategies since 2021. The team is headed by Howie Li, Global Head of Index and ETF with over 17 years industry experience and 4 years at LGIM.
• The Active Strategies team – has been managing ESG (Future World) strategies since 2018 across Equities and Fixed Income. Most recently a Global Credit SDG aligned strategy and Net Zero strategy have been launched. The team is managed by Colin Reedie, Global Head of Active Strategies with over 35 years industry experience and 16 years at LGIM.
• The Multi-Asset team – has been managing ESG (Future World) strategies since 2017. The team is managed by Emil van den Heiligenberg, Head of Asset Allocation with over 26 years industry experience and nine years at LGIM.
• The Solutions Strategies team – has been managing ESG (Future World) Buy and Maintain fixed income strategies since 2018. Most recently the team has had considerable success in launching climate aligned and SDG aligned investment grade credit portfolios for segregated clients. These strategies are now being launched in pooled fund format. The team is managed by Will Riley, Head of Solutions with over 22 years industry experience and three years at LGIM.
• The Real Assets team – launched a Sustainable Property Fund in 2021 with a net-zero alignment objective. The team is managed by Bill Hughes, Head of Real Assets with over 33 years industry experience and 15 years at LGIM.

Global Research and Engagement Groups

Our Global Research and Engagement Groups (GREGs) bring together colleagues from across LGIM to identify the challenges and opportunities that will determine the resiliency of sectors and the companies within them. The output from the group strengthens and streamlines the firm’s engagement activities across investments and stewardship, to enable us to collectively set goals and targets at a company level with one voice, whilst supporting and guiding our investment decisions across the capital structure. As of May 2023, there are over 80 participants which includes members of our investment teams primarily along with representation from Investment Stewardship, who overlap on these groups.

Memberships and associations

We are members of multiple industry-wide associations and networks which promote and encourage strong ESG practices and responsible investing standards. Our involvement with the organisations summarised below highlights how we promote collaborative engagement.

• 30% Club (2010): Campaign group taking action to increase gender diversity on UK company boards and senior management teams.
• 30% Club Investor Group Japan (2019): Group of investors taking action to coordinate the investment community's approach to gender diversity on Japan company boards and senior management teams. Meetings are held in Tokyo on a monthly basis. Member of the Best practices working group and Progress tracking working group.
• 30% Club UK France Investor Group (2020): Group of investors taking action to coordinate the investment community's approach to gender diversity on French company boards and senior management teams. Group was launched in 2020.
• 30% Club UK Investor Group (2011): Group of investors taking action to coordinate the investment community's approach to gender diversity on UK company boards and senior management teams. Meetings are held in London on a quarterly basis. Chaired Group from 2017-2020.
• 30% Coalition (2017): Committed to the goal of women, including women of colour, holding 30% of board seats across US public companies
• Access for Medicine (2020): The Access to Medicine Foundation stimulates and guides pharmaceutical companies to do more for the people living in low- and middle-income countries without adequate access to medicine. Pharma companies are scored in the Access to Medicine Index. ATMF also score companies on their efforts within antimicrobial resistance (AMR) via the AMR Benchmark.
• Aldersgate Group (2012): An alliance of leaders from business, politics and civil society that drives action for a sustainable economy. L&G/LGIM use this forum to engage with UK and EU policy-makers – e.g. they were instrumental in securing the net zero legislation in the UK.
• Alliance for Financing a Just Transition (London School of Economics)(2020): Investors and financial institutions joined forces with universities and trade unions to create the FJTA and translate the growing commitment to a just transition across the financial sector into real world impact. Group was launched in 2020.
• Asian Corporate Governance Association (ACGA)(2012): The ACGA is dedicated to working with financial regulators, stock exchanges, institutional investors and companies to develop and implement better corporate governance practices across 12 markets in Asia.
• Assogestioni (2015): Representative association of Italian Investment management industry. We are a foreign member of the association.
• British Council of Offices ESG committee (2001): ESG committee within the BCO, which aims to research, develop and communicate best practice in all aspects of the office sector.
• British Property Federation (2001): BPF is a membership organisation representing companies involved in property ownership and investment, work with Government and regulatory bodies to help the growth and development of the real estate industry.
• Building Better Partnership (BBP) (2019): Collaboration of 35 of the UK’s leading commercial property owners who are working together to improve the sustainability of existing commercial building stock.
• CDP (formerly Carbon Disclosure Project): LGIM is a part of the CDP Investor Program. We also use data points from CDP as part of our company engagement and analysis.
• Climate Action 100+ (2017): We take part in the ‘world’s biggest single-issue engagement initiative’, focused on the largest corporate emitters of greenhouse gas emissions.
• Climate Bonds Initiative (2015): LGIM is a signatory of the Paris Green Bonds Statement, committing to support the development of green bonds as part of climate finance solutions.
• Coalition for Climate Resilient Investment (CCRI) (2020): CCRI is a United Nations Climate Action Summit and COP26 flagship initiative, which represents the commitment of the global private financial industry, in partnership with key private and public institutions, to foster the more efficient integration of physical climate risks in investment decision-making.
• Corporate Governance Forum (1999): The UK Corporate Governance Forum is a group of UK/EU investors where members can raise UK corporate governance issues. Membership is by invite. Meetings monthly and phone calls bi-weekly.
• Corporate Reporting and Auditing Group (From 2020, CRAG was formally adopted as an IA sub-committee): Investor Group influencing regulators, standard setters, companies and auditors on corporate reporting, accounting & auditing matters. Shapes the positioning of the IA and PLSA.
• COP26: Business Leaders Group (2021): LGIM’s CEO, Michelle Scrimgeour, is the co-chair of the UK government’s COP26 Business Leaders Group,an important forum focused on creating business and sector breakthroughs in how we deliver net zero.
• Council of Institutional Investors (CII) (2011): The CII is an association of pension funds, investors and other foundations and is a leading voice in the US for good corporate governance and strong shareowner rights. We attend the conference every year and have been involved in several collaborative initiatives led by the CII on various ESG topics.
• Diversity Project (2016): The Diversity Project is a cross-company initiative championing a more inclusive culture within the Savings and Investment profession.
• European Association for Investors in Non-Listed Real Estate Vehicles (INREV) (2015): Platform for sharing knowledge on the non-listed (unlisted) real estate industry, to improve transparency, professionalism and best practices across the sector.
• FAIRR Initiative: LGIM is a member of the FAIRR Initiative, an investor group focused on ESG risks, such as climate change and antibiotics resistance, associated with the livestock industry.
• Finance for biodiversity pledge (2021): As a signatory, by 2024 at the latest we commit to: Collaborating and knowledge sharing; Engaging with companies; Assessing impact; Setting targets; Reporting publicly
• Glasgow Financial Alliance for Net Zero (2021): The Glasgow Financial Alliance for Net Zero (GFANZ) brings together existing and new net-zero finance initiatives in one sector-wide coalition, GFANZ provides a forum for leading financial institutions to accelerate the transition to a net-zero global economy. LGIM’s CEO, Michelle Scrimgeour, represents L&G on the CEO Principals Group.
• Global Real Estate Sustainability Benchmark (GRESB) (2012): GRESB is an investor-led initiative to provide ESG data on real asset investments to investors, lenders, managers and the wider industry. GRESB Assessments provide a consistent framework to measure ESG performance based on self-reported data that is validated, scored and peer benchmarked.
• Green Finance Institute – Coalition for the Energy Efficiency of Buildings (2019): Made up of more than 200 individual members from the finance, property and energy sectors, and across policy, academia and non-profit organisations, the CEEB’s remit is to develop the market for financing a net-zero carbon and climate-resilient built environment in the UK. Established by the Green Finance Institute as its flagship coalition in December 2019.
• Harvard Institutional Investor Forum (2019): The Harvard Institutional Investor Forum aims at contributing to discourse, policy making and education with respect to institutional investors and issues of interest to them
• Hong Kong Technical Group on Sustainable Finance (2020): The TEG is a body that aims to improve sustainable finance regulation in the Hong Kong market, under the aegis of the local financial regulator.
• Human Capital Management Coalition (2011): HCMC is a cooperative effort to further elevate human capital management as a critical component in company performance. The Coalition engages companies and other market participants with the aim of understanding and improving how human capital management contributes to the creation of long-term shareholder value.
• Institutional Investor Group on Climate Change (IIGCC) (2011): The IIGCC is a forum for collaboration on climate change for European investors. We participate in both the Policy and Solutions working groups. We also have contributed to the strategic direction of the organisation as our Head of Sustainability and Responsible Investment, Meryam Omi, was appointed to the board in early 2016.  In 2018, LGIM co-authored the IIGCC Guide to Addressing Climate Risks and Opportunities in the Investment Process. This report shares practical tips and examples of good practice so that trustees of asset owner organisations are better equipped to adapt their investment processes not only to underpin more resilient investment portfolios, but to also steer capital in support of the attainment of the goals of the Paris Agreement.
• Interfaith Center on Corporate Responsibility (ICCR): A coalition of 300 global institutional investors. Members represent faith-based organizations, socially responsible asset management companies, unions, foundations, and other responsible investors working alongside a global network of NGO and business partners. The SDGs and the UN Guiding Principles on Business and Human Rights provide the frameworks for the ICCR corporate engagements. The Investor Alliance for Human Rights was launched by ICCR in 2018. Via the ICCR between 200-300 shareholders resolutions are filed per year. We’re members since 2020. ICCR was founded in 1971, filing its first shareholder resolution at GM requesting that the company withdraw its business from South Africa until such time as apartheid was abolished.
• International Corporate Governance Network (ICGN) (2011): The ICGN is an investor-led organisation which aims to promote better standards of corporate governance and stewardship worldwide.
• Investment Association (IA) (2014): The IA provides a structure for LGIM to discuss corporate governance policy and push for collective engagement alongside a number of UK investment managers. LGIM is involved within the organisation at board level; LGIM’s CEO sits on the board of directors, while members of LGIM’s Investment Stewardship team sit on the IA’s corporate governance and remuneration committees, as well as the Sustainability and Responsible Investment Committee.
• Investor Forum (2015): LGIM is a founding member of the Investor Forum, and our Director of Investment Stewardship sits on its board. Membership of the Investor Forum facilitates collaborative engagement with other members and ensures investors speak with one powerful voice.
• IOPA (Investors for Opioid and Pharmaceutical Accountability) (2018 – as observers. 2019 as members): IOPA came together out of escalating concerns that opioid company business risks can both threaten shareholder value and have profound long-term implications for the economy and society
• ISG (Investor Stewardship Group) (2017): The ISG brings all types of investors together to establish a framework of basic standards of investment stewardship and corporate governance for U.S. institutional investor and boardroom conduct
• Japan Climate Leaders’ Partnership (JCLP) (2021): JCLP is a coalition of 178 Japanese companies (as of May 2021). Its goal is to achieve net-zero in Japan by 2050 through activities and voices from business. Activities include: Capturing Important Updates, Taking Actions through Collaboration, Policy Engagement
• Japan Stewardship Initiative (2020): Founded in Nov 2019, JSI aims to seek industry-wide solutions through discussions and information sharing among asset owners, asset managers and relevant parties on practical challenges in stewardship activities. (Secretariat: Japan Exchange Group, Inc. and ICJ, Inc.)
• Japan TCFD Consortium: The consortium aims to undertake projects to promote information disclosure based on the TCFD recommendations; projects pertaining to the use of information disclosed in accordance with the TCFD recommendations; and raising awareness of TCFD in Japan.
• Net Zero Asset Manager Initiative (Founding Signatory since 2020): At the end of 2020, we were one of the founding signatories of the Net Zero Asset Managers Initiative (NZAMI) and committed to being one of those leading our industry to support the transition to reach net-zero greenhouse gas emissions by 2050 or sooner across all assets under management. LGIM sits on the Advisory Committee and is actively involved in the initiative’s Stewardship Working Group.
• One Planet Asset Manager Initiative (2020): An initiative under the aegis of President Macron, aimed to advance the understanding of climate risk and opportunities within long-term investment portfolios. The asset managers will be supporting six of the world’s largest sovereign wealth funds (Abu Dhabi, Kuwait, Qatar, Saudi Arabia, New Zealand, Norway) to build climate considerations into their decision-making.
• SASB Standards Advisory Board (SAB) (2020): The SASB SAB provides feedback to the SASB Staff and Standards Board regarding the implementation and use of the standards, and emerging topics and metrics worthy of future consideration.
• Sustainability Accounting Standards Board (SASB) (2019): LGIMA sits on the Investment Advisory Group of SASB, intending to promote ‘consistent, comparable and reliable disclosure of material and decision-useful ESG information’
• Sustainability Reporting Standard for Social Housing: Development of a new voluntary ESG disclosure framework in the UK social housing sector.
• Taskforce on Climate-related Financial Disclosures (TCFD) (2015): LGIM has been a promoter of the Taskforce on Climate-related Financial Disclosures (TCFD), and has publicly encouraged investee companies to report in line with the TCFD recommendations. LGIM has recently published its own TCFD-aligned publication as an asset manager as has the parent company Legal & General as an asset owner.
• Taskforce on Nature-related Financial Disclosures (TNFD) (2021): LGIM joined the TNFD Observer Group as a member this year, and our primary contribution at this stage is to provide feedback on the output of the working groups, so as to help support the preparatory phase of the TNFD.
• The United Nations Principles for Responsible Investment (PRI) (2010): An international network of investors promoting responsible investment. LGIM are involved with a number of their workstreams.
• Transition Pathway Initiative (2017): Research funding partner on asset-owner led initiative which assesses companies' preparedness for the transition to a low carbon economy.
• UK Green Building Council (UKGBC) (2010): UKGBC is part of the World Green Building Council (WorldGBC) network, a global network of over 70 national Green Building Councils.
• UNEP Finance Initiative: LGIM participated in the joint project from UNEP FI and the PRI on corporate tax, culminating in the launchof a report entitled Engagement Guidance On Corporate Tax Responsibility

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Dialshifter

Literature

• Fund overview & literature (including factsheet)
• Climate Impact Pledge
• Prospectus