As Direct Line Group’s investment strategy evolves, the company is regularly looking for ways to align its investment practices with Environmental, Social and Governance ("ESG") issues. The investment strategy is determined by the Director of Investment Management and Treasury and approved by the Direct Line Group Investment Committee.
To date, the Direct Line Group investment strategy has reflected the following initiatives:
- Corporate credit assets account presently for three quarters of the total investment portfolio benchmark. Initiatives within corporate credit include:
o the majority of assets are managed in portfolios where investment objectives include the requirement to achieve at least a weighted average MSCI ESG rating of ‘A’;
o portfolio managers are encouraged to prefer investments in green bonds where they offer a similar risk-reward profile to other issues;
o the company has committed to reducing the weighted average Green House Gas Emissions Intensity1 by 50% before the end of 2030 (benchmarked against the end of 2020 levels);
o issuer exclusions include (1) companies which manufacture controversial weapons2 , (2) mining companies that generate >5% of revenues from thermal coal production3, (3) electricity generators that derive >5% of revenues from thermal coal power generation3 and (4) any companies that are developing new thermal coal plants or new thermal coal mines.
- All externally managed assets are run by managers who are currently signatories to the United Nations-supported Principles for Responsible Investment;
- Almost 90% of the investments in the infrastructure debt portfolio are in schools, hospitals and other social infrastructure assets;
- The commercial property portfolio invests only in assets with an energy efficiency level of D or higher (or with apportioned funds to achieve this level), exceeding the government’s present minimum requirement of an E rating. The portfolio also has a tailored set of 2022 ESG targets which cover, inter alia, carbon, energy, water and waste.
1Green House Gas (GHG) Emissions Intensity is the weighted average scope 1 and scope 2 GHG emissions in tonnes per million USD of sales
2Controversial weapons include cluster munitions, landmines, and chemical & biological weapons
3Companies considered to be taking positive climate action (PCA) may be held in the portfolio. A PCA company is one which has either committed to Science Based Targets for reducing GHG emissions, or has a “2 degrees or better” Carbon Performance Alignment from the Transition Pathway Initiative (TPI)