Biodiversity & Nature: Royal London Asset Management, Water utilities - engagement
This year, we joined an engagement initiative spearheaded by Royal London Asset Management focused on water utilities. The sector has been under heavy scrutiny with questions raised about their operational and climate resilience, as well as their social license to operate, given ongoing pollution incidents and high levels of indebtedness. Due to our exposure through sterling bonds, we were keen to work with Royal London Asset Management and asset owner peers to understand how companies we invest in are demonstrating improvements and addressing the interrelated issues of climate adaptation, biodiversity, just transition and antimicrobial resistance (AMR).
The two-year engagement programme aims to influence water companies to improve against investor expectations:
- Adaptation to climate physical risks: encouraging the use of innovative technology, such as AI and nature-based solutions, to manage pollution and leakages in order to ensure sustainable water management
- Biodiversity: in collaboration with the UK Centre of Ecology and Hydrology they have been asked to reflect best practice standard such as creating a biodiversity action plan and management of sites of scientific interest (SSSIs) to favourable conditions
- A just transition: focus on affordability, community engagement and placed based solutions
- AMR: demonstrate how they are considering this risk
Research and initial engagement in 2022, enabled development of a scoring system to measure companies’ current performance and progress in the above areas. This score and areas for improvement have also been shared and discussed with the target companies.
Brunel, with the support of Royal London Asset Management and our client funds had engagement conversations with Pennon Group and Wessex Water – both were constructive dialogues that provided additional clarity on the company’s disclosures, future plans and opportunities for further improvement.
The investor group will continue to monitor the companies’ performance and engage with them to drive changes. At the end of the engagement period, Royal London Asset Management will publish a report on the outcomes of this engagement.
