M&G moves into higher gear on sustainability
UK fund manager M&G's recently-updated climate strategy has strengthened its commitment to sustainability with board-level oversight to monitor and advance progress and positive impact.
The firm's new Climate Action Framework structures the firm's approach to climate strategy and focuses on supporting innovation in the real economy. It sets out M&G's priorities on the outcomes and impacts that it is trying to achieve across climate and also introduces nature and social themes.
"We've done this by focusing on alignment of company transition plans, building on our approach of decarbonising our portfolios by enabling us to identify which companies will contribute most," said Kathy Ryan, chief sustainability officer at M&G.
Ryan joined M&G in November 2023 to lead the group’s strategy and embed sustainability across the business and responsible investment and was previously at Irish Life Investment Management, the largest manager of life assurance and pension assets in Ireland.
The new framework outlines three key levers: M&G will seek to grow by increasing allocation to companies with strong transition plans; align by engaging with misaligned companies; and reallocate assets where companies are unable or unwilling to transition.
M&G has introduced a new asset alignment target to support growth, along with a robust engagement threshold target to support alignment in a more structured way.
Reallocating assets may be done by allocating more to funds or strategies such as M&G's Sustain Paris Aligned fund range, which has three funds with more than £5bn in assets, Ryan said.
Green light
The range got the green light from the FCA in late February to adopt the "Sustainability Improvers" label under the UK's Sustainability Disclosure Requirements regulation. It is the first time that the FCA has awarded the label for that theme in a public endorsement of M&G's transition methodology and assessments.
The funds support the mitigation of climate change by investing at least 70% in companies that contribute towards goals aligned with the Paris Agreement on climate change and have the potential to decarbonise their operations over time and reach net-zero targets.
M&G cancelled its dedicated sustainability report last year in favour of putting the information in its annual report, which is a move that is being made by more asset managers as the industry moves to align targets with progress in the real economy as the energy transition accelerates.
"Peers are broadly moving towards alignment-style targets," Ryan said. "To make assessments of the level of alignment of a particular company, we have used industry guidance."
M&G's work is based on the Institutional Investors Group on Climate Change's Net Zero Investment Framework and it has developed its own Transition Assessment Framework.
The firm is one of the largest fund managers in the UK with £395.6bn of assets under management in 2024.