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Scottish Widows Group Limited

Initial target disclosure: March 2022

Portfolio level

Portfolio level – Portfolio decarbonisation reference target

Baseline date: 31 December 2019

Baseline performance: 116 t C02e/£m invested

Target year(s): 2030, 2050


  • Halve the carbon footprint (i.e. t CO2e/£m invested) by 2030.
  • Net zero by 2050 or sooner.

GHG scopes included: Scope 1 & 2 only for all in-scope emissions.

Robustness and coverage of scope 3 data is not yet sufficient for use in target-setting. While we do not believe it’s yet appropriate to set targets in relation to scope 3 emissions, we are beginning to disclose scope 3 emissions for oil, gas and mining sectors in our portfolio, as per PCAF guidance, in our TCFD report. We will add new sectors in the future reports and will consider extending our portfolio targets to cover scope 3 of our underlying holdings when there is market consensus on the appropriateness of available data.

Asset classes in scope: Full portfolio is covered by overall targets, but emissions are currently available and reported only on listed equity and corporate fixed income, real estate, and loans (for assets where PCAF methodologies exist).

Methodology: Targets and levels were set in line with Paris Aligned Investment Initiative’s Net Zero Investment Framework guidance.

Net zero scenarios: The baseline year from which the targets track progress is 2019. This year was selected in line with the recommendation of the Institutional Investors Group on Climate Change, which aligns with the Intergovernmental Panel on Climate Change (IPCC) timeframe to limit global warming to 1.5C in their P1-P3 scenarios.

Emissions metrics: Due to the fast-growing nature of our Defined Contribution pension investment portfolio, we set decarbonisation targets on a relative emission basis.

However, we will disclose annually both absolute and relative emissions (i.e. carbon footprint) of our full portfolio, and briefly comment on progress made on our targets.

Portfolio level – Investment in climate solutions target

Quantitative target

Baseline date: 2021

Baseline performance: n/a; targets are considered as new money, beginning at baseline date

Target year: 2025


  • £20-25bn in ‘climate-aware’ strategies
  • With at least £1bn of the above into climate solutions investments


  • ‘Climate-aware’ definition: funds with a bias towards companies adapting their businesses to be less carbon intensive and/or developing climate solutions;
  • Climate solutions approach: use MSCI Environmental Impact Revenue classed as ‘climate change’ and ‘natural capital’

Asset level

Asset level – Portfolio coverage target

Baseline: This is outsourced to our asset managers. Please see p14 of our Climate Action Plan

Target: Specific targets for alignment have not been set, therefore there is no baseline level to measure from. Scottish Widows outsources to appointed managers the day-to-day management of all our funds. This includes stock selection and asset allocation (whilst taking into account exclusions to thermal coal and tar sand extraction on climate grounds). Our key appointed managers have also committed to achieving net zero in their portfolios by 2050.

Our active stewardship activities include oversight of our appointed managers. As part of our annual operational due diligence review process we intend to monitor the progress being made by investment managers in implementing and achieving emission reductions goals on fund-by-fund and aggregate basis. This will allow us to identify any laggards requiring closer monitoring and engagement, whilst at the same time recognising those funds and managers who are leading.

Additionally, we have recently developed our own voting guidelines on ESG matters; we will actively monitor our appointed managers’ implementation of these guidelines.

Asset level – Engagement threshold target

Baseline: 79% of equity and bond assets in high impact sectors (per the GICS sub-industry classification mapping of TPI’s high impact sectors in Appendix B in the Net Zero Investment Framework (NZIF), plus banks and insurers are under active engagement by our key appointed managers and directly by Scottish Widows.

Target: Whilst Scottish Widows has not yet set a specific target, this is in excess of the NZIF recommended initial target of 70%. We will review this in the next iterations of the Climate Action Plan.

Additional information

Methodology: Reducing the carbon footprint of our investments by 50% by 2030 is a key milestone within our Net Zero mission. Scottish Widows’ investment portfolio is a well diversified one – across regions, asset classes and industries – so is representative of the global investable universe. We believe it is appropriate to set decarbonisation target on this portfolio in line with the IPCC’s recommended pathway of 50% reduction by 2030 with aiming for net zero by 2050 or sooner.

Fossil fuel investment: Thermal coal and tar sands are specifically detailed in the Scottish Widows Exclusion Policy; Coal is the most CO2-intensive power source and a significant contributor to climate change. We believe companies that fail to amend their business models to be less carbon-intensive pose an investment risk.

Therefore, we don’t invest in companies where 5% or more of their revenue is derived from thermal coal extraction and/or tar sand operations. We review the thresholds regularly and expect to reduce it over time in line with the global ambition on exiting coal.

Scottish Widows, together with its parent company Lloyds Banking Group are also members of the Powering Past Coal Alliance.

Scottish Widows Exclusions Policy; Scottish Widows Stewardship Policy

Operational emissions: Lloyds Banking Group, of which Scottish Widows is part, has operational climate pledges, including to achieve net zero by 2030. Our operational climate pledges – Lloyds Banking Group plc

See here for more information on our Responsible Investment Framework & net zero strategy, including Climate Action Plan 2022; Our Climate Change Approach; Responsible Investment & Stewardship Framework; Scottish Widows 2022 TCFD report.

Scottish Widows Group Limited case studies

Scottish Widows: Voting policies for segregated and pooled funds

27 March 2023

Commitment 6: Implementing a stewardship and engagement strategy, with voting policy