Our climate commitments on behalf of our clients

L&G’s Asset Management business will continue to be a signatory of the global Net Zero Asset Managers Initiative (NZAM), a voluntary initiative for asset managers committed, in their individual contexts, to supporting investing in line with the global goal of net zero greenhouse gas emissions. This is one of the many ways in which we recognise and address climate change as a financially material and systemic investment risk. The refreshed NZAM statement is consistent with our perspective on climate change and our fiduciary duties to our clients.

As an asset manager, we have a duty to our clients to address systemic risks – including climate change – because they have the potential to be financially material over a range of time horizons. We are therefore committed to working in partnership with our clients, as part of system-wide change, towards the goal of global net zero emissions, which is why we have been NZAM signatories since its foundation.

The world continues to warm as greenhouse gases (GHGs) continue to be released into the atmosphere. This matters to investors because global warming is associated with physical and economic impacts that are likely to have adverse effects on the achievement of investment objectives. A consequence is higher risks connected to extreme weather events such as floods and heatwaves. There is also increased potential for the world to reach irreversible tipping points, such as changes in airflows and ocean currents. An accelerated clean energy transition itself would have associated financial risks and opportunities. We consider the systemic and specific financial risks and opportunities linked with global warming and the role we can play in efforts to mitigate it.

Much has changed since the Paris Agreement in 2015, when nations committed to “Holding the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels, recognizing that this would significantly reduce the risks and impacts of climate change”.[1] The clean energy revolution has exceeded projections and is transforming economic relationships as it offers alternative energy sources to fossil fuels. Yet at the same time, energy security needs have increased while demand for energy has risen, for example from technologies such as artificial intelligence models and cloud storage.

Global GHG emissions have continued to rise. On current trends it appears likely that the long-term average rise in global temperatures will exceed 1.5°C by the end of the decade.[2] According to our Destination@Risk model, the overall temperature alignment of the MSCI ACWI is projected at 2.9°C,[3] which reflects that the world is not on track.

In our view, the inadequacy of global action to date increases the urgency for the world to reduce GHG emissions. Even if long-run temperatures rise above 1.5°C sooner and for longer than optimal, the global pursuit of net zero carbon emissions by 2050 remains a viable risk mitigation endeavour; relaxing net zero ambitions would imply even higher global temperatures than otherwise.[4] To put it another way: should global net zero carbon emissions by 2050 be consistent with a higher temperature rise, of 1.8°C rather than 1.5°C for example, it would still be worth pursuing, since every 0.1°C increase matters – including for financially material risks.   

Limiting global warming – and therefore the associated investment risks – requires global action across economies and sectors, by companies and policymakers. We believe governments and companies can take economically profitable actions to mitigate global warming risks but there can be limits without system-wide change too. Financially material risks can also be reduced by the profitable pursuit of opportunities associated with the clean energy transition. We reflect these views through our Climate Impact Pledge engagement with companies, including higher emitters, and through policy engagement.

Achieving net zero objectives is predicated on genuine transition in the real economy. We assess the outcomes of our initiatives in this light, with the intention that our actions contribute meaningfully to the global climate transition.

We welcomed NZAM’s review, and we support its refreshed commitment statement. L&G will continue to support its clients in line with our fiduciary duties to help them address climate-related risks and opportunities, providing new investment products and setting targets where appropriate. We will continue to engage with policymakers, regulators, companies, and other organisations in support of our clients’ investment objectives.

This article is the second part of a series designed to help clients navigate change in climate investing. The first summarises three critical initiatives that we believe should be on your radar in 2026.

Whilst L&G has integrated Environmental, Social, and Governance (ESG) considerations into its investment decision-making and stewardship practices, this does not guarantee the achievement of responsible investing goals within funds that do not include specific ESG goals within their objectives.

[1] The Paris Agreement | UNFCCC
[2] Progress of Global Climate Change, Dashboard, Data, Insights Dashboard and Data
[3] On a carbon-weighted basis as at December 2025.
[4] Projections by the Intergovernmental Panel on Climate Change (IPCC) linked this to reducing global GHG emissions to net zero by the 2070s and reducing carbon emissions to net zero by 2050. The projection is for 1.5°C with no or limited overshoot, suggesting temperatures could rise higher for a period with carbon subsequently extracted from the atmosphere. Efforts to reduce emissions have often focused on net zero for all GHG emissions by 2050.