Scottish Widows to Divest £440 Million from Firms That Fail ESG Standards

UK-based life insurance and pensions company Scottish Widows is divesting at least £440 million ($583.9 million) from companies that it says have failed to live up to its environmental, social, and governance (ESG) standards, and warned that it will divest even more if companies don’t improve the sustainability of their business.

Scottish Widows, which has approximately £170 billion in assets under management (AUM), said it is working with its fund manager partners to begin divesting from companies with the highest investment risk based on their business practices.

The insurance and pension provider’s new exclusions policy takes aim at companies that earn more than 10% of their revenue from thermal coal and tar sands, manufacturers of controversial weapons, and violators of the UN Global Compact on human rights, which consists of 10 principles guiding corporate behavior on human rights, labor, environment, and corruption. The policy applies unless the size and type of investment means that Scottish Widows can influence change in the offending companies’ business models.

“As a large institutional investor, we have a vital role to play in shielding our customers from ESG investment risks, as well as influencing positive change through the investments we hold,” Maria Nazarova-Doyle, Scottish Widows’ head of pension investments, said in a statement. “Our exclusions focus on companies we believe pose the most severe investment risk due to the nature of their businesses, which can’t be addressed through engagement.”

Want the latest institutional investment industry news and insights? Sign up for CIO newsletters. 

The company said the exclusions will be applied across its life, pension, and open-ended investment company funds, including its flagship workplace default investment options. It will also be applied to index trackers and its own active funds.

Nazarova-Doyle said the growth of what she termed “at-risk companies” that are targeted for exclusion will likely be “severely limited by future regulations and the changing views of customers and investors, leading to significant falls in their share prices.”

As part of the policy, Scottish Widows said it is working with its strategic investment partners to apply the exclusions to the external pooled funds it manages on behalf of a broad range of institutions.

“We recognize there’s more we can do as a company and that this is just one step in the journey,” Nazarova-Doyle said. “However, this underlines our commitment of becoming a market leader in responsible investment and to make a real difference.”

In August, Scottish Widows became the first investor in BlackRock’s newly launched Authorised Contractual Scheme Climate Transition World Equity Fund, allocating £2 billion of its pension portfolios to the fund, which it also helped design. The fund backs businesses that decrease carbon emissions, increase clean technology revenue, and display more efficient water and waste management. The fund also makes significant ESG exclusions.

Cambridge University to Divest from Fossil Fuels by 2030

USS Targets Tobacco, Thermal Coal for Divestment, Exclusion

Tags: ACS Climate Transition World Equity Fund, BlackRock, divest, ESG, insurance, Maria Nazarova-Doyle, Pension, Scottish Widows

Ken Griffin, founder, CEO and co-CIO of investment firm Citadel

Count Ken Griffin as one of the success stories of turbulent 2020. His hedge fund empire was down, as were most other investors, in the February–March market debacle. But his firm Citadel’s rebound has been spectacular.

His flagship Wellington fund gained just over 20% through October, more than double the S&P 500’s showing. Overall assets for the hedge funds expanded to $35 billion. About a fifth of that, some $6 billion, is Griffin’s, Bloomberg calculates. His estimated net worth is $15 billion, Forbes says, which makes him the 34^th richest person in the United States. His firm actually ended up ahead 1.2% for March (the market bottomed on March 23) and more than 5% for the first quarter.

The basis for the good showing was picking up good bargains in the late winter wreckage this year. Example: T-Mobile, which got slammed back then, and since has advanced 60% on account of its merger with Sprint. His hedge fund Citadel’s most recent position in the wireless carrier is $692 million, regulatory filings show. Griffin also has built strong positions in the top tech firms, whose prices have soared, such as Apple, which tanked too, eight months ago.

“It was a macro trader’s dream,” Griffin remarked at a recent event for the Robin Hood Foundation, the nonprofit anti-poverty charity he donates to. Citadel bought “when people are panicking,” he said. A Citadel spokeswoman said they can’t comment on performance.

Want the latest institutional investment industry news and insights? Sign up for CIO newsletters. 

Throughout, Griffin balanced his forays with some sensible safeguards. For instance, at mid-year, he had put “collars” around two high-flying holding, in case of volatility, which has been abundant this year—for Tesla and Amazon. Consisting of a put and a call with close to equal amounts, this options maneuver protects on the downside if a stock plummets, although it does limit the upside.

Also helping his bottom line this year is his ownership of Citadel Securities, one of the biggest market-making firms, which handles 20% of US stock trades. This year’s prodigious trading has been a boon to this unit.

Citadel now has large gold holdings, a change for him, he said at the Robin Hood event. This in part is a buffer against inflation, which Griffin has long been expecting to resurge. He pointed to other inflation hedges to own, such as energy and real estate.

No doubt, Griffin is one colorful guy. He famously started out in finance by trading corporate bonds from his Harvard dorm room, contending they were mispriced.

And he has a thing for trophy real estate. He has plugged $600 million since 2019, per Bloomberg, buying properties in Manhattan; Palm Beach, Florida; and London. Earlier this year, he scored Calvin Klein’s seven-acre seaside compound in Southampton, New York.