Royal London says ESG could be hit in the short term by the energy crisis

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A model of 3D printed oil barrels is seen in front of the falling stock market chart in this illustration taken December 1, 2021. REUTERS/Dado Ruvic/

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LONDON, Aug 5 (Reuters) – British asset manager and life insurer Royal London (ROLGPI.UL) said on Friday that Europe’s gas crisis could mean that companies it invests in reverse policies responsible investing in the short term, but divestment was a last resort.

European countries, including Germany and Italy, are considering bringing back coal for power generation due to the Ukraine crisis, which has reduced Russian gas flows. Read more

Some companies have also said they may be consuming more coal, which risks lowering their environmental, social and governance (ESG) ratings. Read more

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“Could some companies go back in the short term? This could be unavoidable in the western world due to the current focus on energy security,” Royal London chief executive Barry O’Dwyer told Reuters. .

“We should talk to the management of these companies to understand how they would get back on a net-zero trajectory,” he said in a phone interview.

However, Royal London is unlikely to sell businesses as it prefers to engage with them, O’Dwyer said.

“Disposal is a last resort for us and only if management just won’t listen,” he said, adding that Royal London had not yet taken such action because “most premier companies order get it”.

Royal London, Britain’s largest mutual life insurer, said its assets under management fell 9% in the first half of 2022 to 150 billion pounds ($182.13 billion) as net inflows were offset by market declines.

Most fund companies saw their assets fall due to market volatility, including Hargreaves Lansdown (HRGV.L), which on Friday reported lower assets for the year as a whole. Read more

Royal London’s operating profit rose 36% to 109 million pounds.

($1 = 0.8236 pounds)

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Reporting by Carolyn Cohn; Editing by Alexander Smith

Our standards: The Thomson Reuters Trust Principles.

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