Asset manager Legal & General Investment Management (LGIM) has significantly expanded its environmental engagement, setting stricter policies for both climate and nature opportunities, according to its active ownership report.

In 2023, LGIM strengthened its deforestation policy, increasing its minimum expectations for companies in deforestation-critical sectors like consumer staples, materials and energy. The enhanced expectations resulted in vote sanctions against over 100 companies due to lack of a deforestation policy or programme in place.

The asset manager has also set out a clear approach to broader nature risks and opportunities encompassing natural capital management, circular economy and water.

On the issue of climate, the company identified 342 companies within its climate impact pledge subject to voting sanctions for not meeting its minimum climate-change standards.

Last year was a record year for climate-related shareholder proposals. Over the course of the year, the company voted on 145 climate-related proposals and supported 111 (76.6%). The vast majority of these votes were filed in North America (103), while 21 were filed in Japan and three in the UK.

The company’s investment stewardship team cast 149,000 votes at 15,580 meetings to drive long-term, systemic change on environmental, social and governance-related risk factors with an eye to delivering sustainable value on behalf of its clients.

In the current 2023-2024 engagement cycle, it will introduce new baseline expectations for mining, power generation utilities, and oil and gas. Companies in these sectors will be identified for vote sanctions if they choose to expand capacity of thermal coal mining and power generation or, in the case of the oil and gas sector, fail to disclose methane emissions. Vote sanctions will be applied in the 2024 annual general meeting season, targeting the chair of the board.

In 2024, LGIM will continue to engage with companies through its climate impact pledge to help manage the transition to net zero.

“The challenging and fast-moving world we live in, marked by geopolitical tension, extreme weather events and economic uncertainty,” says Michelle Scrimgeour, the company’s CEO, “underscores the importance and central role asset managers can play as long-term stewards of client capital while helping to meet the challenges facing our societies.”