JUST GROUP PLC Annual Report and Accounts 2020
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sustainable investment strategy
Breaking new ground, investing the just way
As investors, Just benefits from further asset diversification, while supporting the transition to a low carbon economy. Sustainalytics will annually review the projects for which the Green Bond proceeds are allocated and the bond’s ongoing compliance with the initial SIF. Separately we expect to increase the Group’s exposure to social investments including local authority loans, social housing, care facilities, student accommodation, and other areas that have a positive social purpose. A significant proportion of our investments are in lifetime mortgages, which fulfil an important social purpose by providing an option to customers to supplement their pension income or to fund larger purchases such as home improvements. By releasing equity from their home, the customer can remain in their home, close to friends and family, rather than downsizing and moving elsewhere. LOOKING TO THE FUTURE ESG is constantly evolving. Therefore, in order to make successful economic investments it is important to be proactive so as to anticipate regulatory requirements and to manage our risks, including reputational. Our framework will evolve over time to adapt to external and internal requirements. For example, during 2021 we will consider refining our investment approach to the mining sector and utilities, in particular those that use coal for a proportion of their power generation. CLIMATE CHANGE Over the last decade there has been increased awareness of climate change risk and its impact on asset owners. Our regulator, the Prudential Regulation Authority 2 recently asked insurers to model the risks posed by climate change under a range of scenarios. This was an exploratory exercise to gauge the impact to both the firm’s liabilities and the investments stemming from physical and transition risks. Just wishes to fully integrate climate change analysis and reporting for our investment portfolios, not only to comply with the new standards requested by the PRA, but also as a risk mitigating tool. We believe that quality data is important in order to properly address and map these risks. We have formed a long-term partnership with Carbon Delta (part of MSCI) who provide a comprehensive bottom-up analysis on both single holdings and at portfolio level to measure Climate Value-at- Risk contribution on transition risk and physical risk scenarios.
Just has a strong social purpose: we help people achieve a better later life. It follows that we consider environmental, social and governance (“ESG”) factors in all investment analysis and decisions. Just has developed a Sustainable Investment Framework (“SIF”), to formally integrate ESG considerations into our investment portfolio and decision-making process. The SIF is available at https://www.justgroupplc.co.uk/investors/ESG. GREEN INVESTMENTS, GREEN BOND AND A POSITIVE SOCIAL PURPOSE Just’s ESG credentials are already firmly established as a member of the FTSE4Good index series. As of 31 December 2020, Just Group has invested £1.1bn (8.8% of its bond portfolio 1 ) in dedicated green and social investments. During 2020, we formally developed a Sustainable Bond Framework, which received a second party opinion from Sustainalytics on the framework’s environmental and social credentials. Sustainalytics are a subsidiary of Morningstar and one of the world’s leading ESG rating firms. In October 2020, Just Group became the first UK insurer to issue a Green Bond, resulting in gross issuance proceeds of £250m. The Group has provided a commitment to invest the proceeds in eligible green projects, including further investments in renewable energy, and expand into new areas such as green buildings and clean transportation. Given the predictable nature of guaranteed income cash flows, life insurers such as Just are ideal providers of long-term finance to such projects.
1 Carrying value or cost. 2 https://www.bankofengland.co.uk/news/2019/december/boe-consults-on-proposals-for- stress-testing-the-financial-stability-implications-of-climate-change.
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