Sustainability Matters

8 We’ve entered a more aware era of investing, with a growing focus on environmental, social and governance (ESG) challenges such as climate change, plastic pollution and racial inequality. Customers increasingly recognise that these factors can impact long-term investment performance, and that the way we invest can’t be viewed separately from the kind of world we want to live in. Our pensions and other investments can play a key role in creating a more sustainable future, by supporting responsible company behaviour and using our collective voice as investors to drive change. The science is clear – we urgently need to correct our collective course if we’re to avoid the worst effects of climate change. It’s all hands on deck, and we’re determined to play our part. Integrating ESG into our workplace pensions Over 90% of UK pension scheme members are invested in the default fund1. We’re committed to net zero carbon emissions for our default funds by 2050, and to halving emissions by 2030 (relative to 2019). We’ve significantly increased the proportion of funds that take ESG factors into consideration, shifting over £12 billion of default assets into these types of strategies. Wide choice We offer over 200 responsible investment funds on our platforms, giving customers the ability to focus on the issues that matter to them, whether it’s sustainability more broadly, or specific themes such as climate change or social equality. Stewardship Stewardship – or active ownership – is critical to driving positive change in the companies our customers invest in. This refers to the use of influence to improve how companies are managed, making sure they focus on the long term and embed sustainability into their decision-making. We expect all the fund managers we partner with to demonstrate stewardship, by actively engaging with companies and voting wisely at shareholder meetings (see our Responsible Investment Framework). Our stewardship priorities are informed by our stakeholders, including our customers. 1 The Pension Regulator, DC trust scheme return data 2020-2021. March 2021.

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