Launched in September 2007 by HRH The Prince of Wales, Climatewise was set up to aid members in dealing with climate change risks. We are signatories and sit on the managing committee where we play a part in identifying, analysing and managing risks. We look to assist where possible in the development of public policy, investigate how climate change impacts on our investment strategies and we provide help on risk management to customers, both individual and commercial.
This is our progress update against the 6 core principles applied by Climatewise.
As a 90% UK orientated company and with our 6.4 million clients with over 7 Million policies we continue to approach climate change with the focus of managing risks and opportunities associated with delivering on the life assurance, pensions and savings products that we manage on our client's behalf.
Since our first report on the Association of British Insurers (ABI's) Climatewise Principles back in September 2008, much progress has been made across our Group and this update aims to set out that progress clearly and succinctly. At Legal & General we have always taken our environmental responsibilities seriously, what we have found useful through this ABI collaboration is the exploration of other avenues associated with climate change. We have found the Climatewise Group and Management Committee an interesting concept. It is positive to sit down with our peers (and competitors) to work across the industry as a force for good.
Principle 1 - Lead in Risk Analysis
The UK climate is already changing and because of this we continue to be involved with working groups to ensure practical measures are taken with regard to climate change risks. We are carefully reviewing the UKC09 projections with great interest and are involved with risk research sharing events through our Climatewise membership. We are a firm believer in leading by example and have been disclosing our environmental key performance indicators in our CSR Report for a number of years Click Here
We have supported and completed the Carbon Disclosure Project (CDP) returns since it began and in 2008 Ranked 1st (out of 26) in the Global Life and Health Insurance Sector Study by Triodos Bank for environmental management. Triodos said "On environment, Legal & General Group is an industry leader in environmental certification and discloses quantitative targets to reduce its carbon dioxide emissions."
We support industry wide research on forecasting with the ABI and continue to be involved with the United Nations Environment Programme (UNEP) Financial Institutions Working Group on Climate Change and the Financial Sector.
The most significant risk is to Legal & General's general insurance business' solvency through weather catastrophe. As a result, we have invested heavily in data from external sources for pricing, underwriting and capital modelling purposes. Our general insurance business continues to investigate sources of data to improve this understanding and is kept up to date with weather modelling through its reinsurance brokers and weather risk forums. An update was provided to Investment Analysts in September 2008 Click Here
In 2008 the CSR and Risk Framework departments at Legal & General are reviewing the disclosure of the Group's integrated approach to management of Social, Environmental and Ethical (SEE) risks. In addition to the standard economic and catastrophe risks which are managed by our general insurance business and Legal & General Investment Management (LGIM), the company employs a substantial risk management process to assess pandemic risk, weather events and their changes to human behaviour such as cancer and water borne epidemics in response to climate change (i.e. malaria and cholera).
The process of capital reservation in line with Group risks is called 'Stress and Scenario testing'. The uniqueness around this approach is that Legal & General do not only scenario plan, but they also reserve capital on the basis of risk. Click here to see our Risk Process adopted across the Group and Click Here for the Principle Risks and Uncertainties disclosed in our 2008 report and accounts.
Principle 2 - Inform public policy making
The views of our stakeholders are important in driving policy on climate change. We are predominantly UK based and it has become apparent from our Climatewise engagement that much of the public policy debate is focused overseas.
Despite this, we have been supporting Climatewise in producing statements on the United Nations Framework Convention on Climate Change (UNFCC) negotiations and also for The Prince of Wales' Corporate Leaders Group on Climate Change 'Copenhagen Communiqué'.
Our general insurance business continues to support the ABI's Statement of Principles on the provision of flood cover in the UK and provides advice on insurance issues to customers in areas known to be at risk from flooding. The business has built on the work carried out with loss adjusters and suppliers following the floods of 2007, developing best practice for responding effectively to severe weather events including flood, wind, storm and subsidence.
The business also continues to work with the ABI on flood management awareness and improved funding for flood defences
Legal & General Group are founding members of the London Climate Change Agency, which aims to reduce greenhouse gas emissions in London and chaired the Natural Environment Research Council (NERC) for the first six years of this century. The NERC funds £400m per year into the science and consequences of climate change which contributed to the IPCC (Intergovernmental Panel on Climate Change) report which very effectively concluded that climate change was underway with severe future consequences.
Our Chairman, Sir Rob Margetts also chairs the Energy Technologies Institute, a public private venture to develop and demonstrate new renewable technologies with the aim of moving these technologies into widespread application. In 2009, Sir Rob Margetts also attended the University of Cambridge Finance Leaders Programme for Sustainability Leadership representing our companies' position on climate change matters.
In spring 2009, Legal & General Investment Management has actively been involved with the Princes Rainforest Project in the creation of their Rainforest Bond. We have held several product design meetings to advise the project on how to attract institutional and retails funds. We look forward to seeing the product in the Autumn of 2009.
Note: Please also see Section below on Incorporating Climate change into Investment Strategies
Principle 3 - Support climate awareness amongst our customers
To manage and maintain our 7.4 million live customer policies, Legal & General must use paper, energy and transport. In 2007 the company changed its reporting in response to feedback from Business in the Community (BitC) to ensure that customers are aware of the impact of their products on the environment at a "Per policy" level Click Here. In 2009 we have set targets around reducing the paper used per policy.
Our Commercial Property Business is also providing information and feedback to the UK Green Building Council who are working with the Government to prepare a report ahead of Government paper next year on how to dramatically improve the sustainability and reduce carbon emissions of new and existing homes.
With our business model of 90% of our products being recommended by intermediaries rather than direct from us to clients (i.e Banks or Financial Advisors) we continue to work upon our biggest areas of environmental influence which is to manage our own businesses environmental impacts and engage others on their environmental impact (i.e Suppliers, Investees, and Property Occupiers)
Principle 4 - Incorporate climate change into our investment strategies
Legal & General Investment Management (LGIM) incorporate environmental criteria into a Corporate Governance Code of Conduct for engagement with other FTSE 350 companies. By promoting ABI disclosure initiatives and engaging investee companies in discussions on their environmental programmes LGIM exert influence on their thinking. Click Here to see 2008 progress.
Since our last report we have been involved with a number of workshops and working groups, In spring 2009, Legal & General Investment Management has actively been involved with the Princes Rainforest Project in the creation of their Rainforest Bond. We have held several product design meetings to advise the project on how to attract institutional and retails funds. We look forward to seeing the product in the Autumn of 2009.
We have also been involved with the following:
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The IIGCC/ Mercer Trustee Seminar on Climate Change and Investment Implications (March 2009)
The Climatewise Members Investment Workshop (April 2009)
The UK Sustainable Investment Forum's (UKSIF) Project to Re-Assess Company Pension Schemes on Responsible Investment Criteria (part of the UKSIF Sustainable Pensions Project)
The Clean Investor Conference (May 2009)
Legal & General Property (LGP) continues its industry leadership through its sustainability policies and its education programme in partnership with the College of Estates Management. This initiative, which builds upon existing initiatives such as recycling and building design, is updated and continued with changing regulations and industry practices and brings together shared knowledge, experience and learning across the industry. LGP's Managing Director, Bill Hughes has been playing a major part in the UK Green Building Council's Code for Sustainable Buildings Task Group considering how a common working platform can be achieved to work together to continually improve standards in the sustainable performance of our new and existing building stock. LGP's belief is that sustainability credentials will affect future returns for property investment with current priorities set to integrate sustainability into asset valuations, continuous benchmarking of portfolios through Upstream and Investment Property Databank (IPD) and ensuring best practice through adherence to Energy Performance Certificates (EPC) and ISO14001. In the past 12 months LGP has:
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Completed 281 EPC's
Implemented a carbon reduction programme for 24 key properties with potential savings of £93,000
Worked with its management agents to adopt green lease best practice tool kits across all service charge properties in collaboration with occupiers
Achieved ISO14001 for 22 directly managed properties (at time of writing) with 40 planned for the end of 2009
Achieved ISO14001 for seven assets under the Leisure Fund
Maintained ISO14001 for 24 properties managed by our agents King Sturge
Benchmarked selective funds in partnership with Upstream and agreed sustainable improvement plans for Q3 2009with 46 Sustainability Portfolio Analysis questionnaires completed for properties in the Managed, Segregated and Linked Life Funds
Continued to monitor the environmental credentials of our third party suppliers (King Sturge and DTZ) engaging with their respective supply chains (working directly on LGP assets) using the Legal & General supplier carbon questionnaire/ carbon footprint tool
Principle 5 - Reduce the environmental impact of our business
Our environment programme has focused on improving energy efficiency and on reducing the proportion of un-recycled waste from operations. We were the first financial services company to achieve the ISO14001 certificate and in doing so have reduced both the carbon emissions from burning fossil fuels and reduced the generation of the (far more harmful) methane gases from landfill sites. An update on our environmental management can be found here
Supply Chain
Legal & General recognises that the specification of bought in goods or services can have a direct impact on the environmental performance of our buildings and business processes. We also believe that consideration of CSR issues in the specification of a product can have a positive impact both within Legal & General and within our global supply chain. We have therefore developed specifications for key commodities, which are determined through a life cycle assessment of their major impacts. Click Here to see our Sustainably Procurement Policy
As an example, in 2007 we developed a specification for IT desktop equipment, including chemical use, energy efficiency and recyclability. This specification is based upon IEEE 1680- 2006, the performance standard for electronic products produced by the Institute of Electrical and Electronics Engineers. In 2008, we adopted this specification for the purchase of our PCs, monitors and laptops.
A number of the suppliers from Legal & General's general insurance business are subject to the ISO14001 environmental management standard certification operated by Legal & General's procurement department. Following the introduction of the Site Waste Management Plan regulations in April 2008, the claims and procurement teams have conducted a review of the environmental protection legislation that has been in force since 1990 to ensure that debris and other waste arising from household insurance losses is minimised in accordance with government targets. Loss adjusters and suppliers have been challenged to reuse and recycle as much material as possible in order to reduce the volume of waste being transferred to landfill. This activity will also have a beneficial impact on indemnity spend: DEFRA estimates put the wastage associated with construction projects as high as 13% of the total of materials initially brought to site.
In our 2008 interim report, we published our intention to establish and report the carbon footprint of the supply chain in 2010's CSR report. We are committed to supporting our suppliers to develop their carbon management practices and in November 2008, held a Carbon Masterclass to explain Legal & General's reporting requirements and introduce a questionnaire which allows this data to be captured. The intention is that over time the questionnaire will become more sophisticated as our carbon management and that of our supply chain becomes more mature. We envisage that once we have established a baseline in 2010, we will be able to agree target reduction with our suppliers and establish the environmental impact of our activities 'by product'.
We recognise our suppliers' CSR achievements through our Making A Difference Awards. In 2008 we had a record number of entries, which were short listed to 5 finalists. The judging panel, including representation from Business in the Community (BITC), were delighted to make the 2008 Award to Ansa, who provide drainage and repair services for our policyholders.
In 2009 we aim to focus the Making A Difference awards to those suppliers that have effectively improved their Carbon Management.
Click Here for more details and the ANSA Video
Staff Involvement in Environmental Issues
In managing the impact of its activities on climate change, we have been conscious of the importance our staff attach to this issue. Their personal efforts to improve the environment both in the workplace and in the community continue to impress, so to try and assist our environmentally minded staff and to effectively challenge those who perhaps are not, we have launched an online environmental awareness package across the Group in association with The World Wildlife Fund for Nature (WWF). Entitled 'Who cares about the environment?' the foundation of this course is to challenge the decisions made by staff at work without being patronising, in order to bring ideas and a consensus together to try and reduce our impacts and costs in preparation for the CRC and other environmental challenges the Group is likely to face in years to come.
Inspired by Legal & General (L&G) Company research revealing '82% of Britons are annoyed by government and business initiatives that are forcing green values on them', L&G asked award winning Rational Madness Theatre Company to provide a new and innovative way of encouraging employees to think about their contribution to environmental performance.
Rational Madness developed a tailored performance, a play called Recycled Dreams, which premiered simultaneously at the Edinburgh Fringe Festival and L&G's Edinburgh office. The play went on to tour L&G offices (Cardiff, Kingswood, Birmingham, Swindon, London and Brighton) and play at a public venue in Brighton.
The play challenges employees' conventional approaches to the sustainability message, exploring personal sustainability issues and how these interact with corporate (and global) messages and problems. There are no preachy green messages. The play uses the 'Environment' as the backdrop for an encounter between three human beings, a conversation about life, and how we sustain our dreams in the face of repetition and mediocrity.
This is a unique approach to organisational theatre as it takes performance directly to a business audience, with direct, high-impact theatre, without debriefing or follow-up workshops. This runs counter to many other approaches, and evaluation has proved that art in itself is sometimes all that is needed to stimulate deep reflection and even behavioural change.
It is a unique challenge to stage an on-site piece of theatre that can stand its ground in non-theatre venues, and can also play in a traditional theatre space. Recycled Dreams adapts to suit different sized performance spaces. The company performs the play with real photocopiers in real offices, using paper discarded by office staff. The staff became the audience, and the play, drawing on the work of Rational Madness and Bertolt Brecht, holds up a mirror for the audience to allow them to see how sustainability applies to them personally.
Recycled Dreams acted as impetus, attracting attention across L&G's business amongst employees. This was a core stimulus in changing how L&G communicate on environmental issues; including developing changes in language used with employees and understanding employee motivations
The roll out of a tool called "Eco-Monitor", appearing on all 8,000 employee's screens as a desktop icon, was originally planned to only show levels of C02 emissions regarding switched on PC's. It now incorporates more comprehensive and helpful measures including "Time at Desk" for employees worried about work/life balance, "Cost of Emissions", for the cost conscious and "Co2" emissions for environmentally mindful employees. Ironically this tool has accommodated the key questions the characters associate with in the play!
Changes to L&G's company car policy in late 2008 referred to upcoming regulations and the impacts on the bottom line, rather than just stating "it's bad for the environment". L&G drove 1.2million business miles less in 2008 than 2007.
Although regulatory public environmental targets concerning emissions through C02 are important, the play revealed that 'use of paper' is the visible resource that L&G employees most associate with being green or not. There is visible movement when comparing environmental targets from 2008 and 2009*.
http://reports.legalandgeneralgroup.com/2008/csr/ourgroup/performanceagainsttargets2008.html
http://reports.legalandgeneralgroup.com/2008/csr/ourgroup/2009csrtargets.html
Principle 6 - Report and be accountable
Overall responsibility for climate change issues is held by the Group Environment Committee chaired by Elaine MacLean (Group HR Director). This is a sub committee of the CSR Committee chaired by the Group Chief Executive, Tim Breedon. More details of our governance can be found here
We have also taken steps to expand upon the public disclosure of Environmental, Social and Governance (ESG) impacts of our Overseas expansion and in outsourcing our IT Business. More public details can be found here
In 2008 we also hosted a benchmarking visit with Nippon Life (Japan) who had identified our approach to ISO14001 to drive environmental performance as leading the industry which was as a result of our public reporting.
Our CSR Report is part of our Annual report and Accounts reporting suite and we remain committed to reporting on the Environmental impacts and challenges as part of our ESG considerations with the stakeholders in our business.
Graham Precey
Head of CSR
Legal & General Group
30th June 2009
