What is responsible investing?

Responsible investing considers the impacts companies have on people and the planet and how they are managed, alongside the potential financial returns.

What is ESG?

Responsible investing is an approach that incorporates environmental, social, and governance (ESG) factors. It aims to improve risk management and generate sustainable, long-term returns.

What is responsible investing?

Responsible investing considers the impacts companies have on people and the planet and how they are managed, alongside the potential financial returns.

 

What is ESG?

Responsible investing is an approach that incorporates environmental, social, and governance (ESG) factors. It aims to improve risk management and generate sustainable, long-term returns.

ESG factors

Environment

Interaction with the physical environment. This includes emissions driving climate change and anything else linked to the environment. For example, biodiversity loss, pollution and extraction of natural resources.

Social

Impact on society and communities. This includes health and safety, human rights, modern slavery, labour standards and diversity and inclusion.

Governance

How companies are managed.  This includes corporate practices and policies, clarity in financial reporting, tax strategy, board structure, and accountability of leadership.

Why invest responsibly?

Make a positive impact

Responsible investing can allow your money to grow while having a positive impact on people and the planet.

It gives you an opportunity to align your money with your values. For example, by avoiding harmful activities or sectors, or by seeking investments in companies committed to ethical and sustainable goals.

Increased awareness

Countries, companies and investors have become more aware of ESG issues in recent years. They're trying to tackle global challenges. These challenges include climate change, economic inequality, and data security threats. This change transformed responsible investments.

They moved from a niche proposition to a major theme in global markets. In 2022, global ESG assets surpassed $30 trillion. They're set to exceed $40 trillion by 2030. This amount represents 25% of all assets globally.

Bloomberg Intelligence, 2024.

Resilient investments

Investing responsibly gives both downside protection and upside potential.

Downside protection means identifying and reducing exposure to ESG risks. This could be companies that aren’t improving carbon emissions, waste and water management, workers’ rights, gender equality and board diversity.

Upside potential refers to how investors can benefit from growth and profit opportunities. They can achieve this by investing in companies with strong ESG credentials. Investors can also choose companies that are making real efforts to transition to a low-carbon economy.

Our commitment

At Lloyds Banking Group, we’re playing our part to build a sustainable and inclusive future through the investments we make.

We’ve set several targets for sustainable finance and investments to support the decarbonisation of our business.

Lloyds

We've committed £30 billion to sustainable finance in commercial banking by 2026.

We aim for a 50% reduction in carbon emissions linked to our lending activity by 2030.

Scottish Widows

In our pensions business, Scottish Widows achieved its cumulative investment target of investing £20 to £25 billion in climate-aware strategies by 2025. £25.9 billion was invested by the end of 2024.

This plan supports its goal of halving financed emissions by 2030 and achieving net-zero emissions by 2050.

Understanding FCA sustainability labels

For UK-based funds, the Financial Conduct Authority (FCA) has introduced four sustainability labels to help investors with choosing sustainable investments. Funds with these labels aim to improve or pursue positive outcomes for the environment and/or society.

Focus

Funds investing in companies that are environmentally and/or socially sustainable. 

Improvers

Funds investing in companies with the potential to improve their environmental and/or social sustainability over time.

Impact

Funds investing in companies that aim to achieve a positive, measurable impact on the environment and/or society. 

Mixed goals

Funds investing in a mix of companies that are already sustainable, have potential to become more sustainable or aim to achieve a positive impact.

To get the label, the funds must meet strict criteria set by the regulator. This helps prevent greenwashing, which is when companies advertise a product as more sustainable than it actually is.

Getting started with responsible investing

The Funds Centre is a great starting point to identify responsible investment options that align with your preferences and goals.

Please remember that the value of investments and the income from them can fall as well as rise, and you may get back less than you invest. If you’re not sure about investing, seek financial advice. There will normally be a charge for that advice.

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Protecting your money

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Investments totalling up to £85,000 are protected by the Financial Services Compensation Scheme. This limit applies to the combined total of stocks or cash holdings in these brands that we administer. This is in addition to any savings you hold across Lloyds Banking Group.



Protecting your money

FSCS logo

Investments totalling up to £85,000 are protected by the Financial Services Compensation Scheme. This limit applies to the combined total of stocks or cash holdings in these brands that we administer. This is in addition to any savings you hold across Lloyds Banking Group.

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Important legal information

The Lloyds Bank Direct Investments Service is operated by Halifax Share Dealing Limited. Registered Office: Trinity Road, Halifax, West Yorkshire, HX1 2RG. Registered in England and Wales no. 3195646. Halifax Share Dealing Limited is authorised and regulated by the Financial Conduct Authority under registration number 183332. A Member of the London Stock Exchange and an HM Revenue & Customs Approved ISA Manager.