Materiality

Our first independent materiality assessment was delivered in 2014. One of our five growth drivers inspires us to diversify our business by expanding internationally. Therefore a vital part of our governance work has been to review our growing US businesses to see what stakeholders expect. We commissioned Schlange & Co to work with our US investment management business (LGIMA) and Legal & General America (LGA) to:

  • Understand how stakeholder expectations in the US were similar or different to stakeholders in other parts of the group
  • Find out how these businesses sit competitively
  • Discover what is expected by stakeholders from these businesses as they grow
Materiality matrix (graph). We apologise that this graph does not yet meet accessibility guidelines.

The results for our US based companies clearly show which areas of responsible business policy our stakeholders prioritise as being the most important:

  • Customer privacy was considered the most relevant CR issue for both businesses, followed by compliance, cyber security, corporate governance and responsible marketing and fair sales
  • Internal and external stakeholders expect both cyber security and product innovation to increase in relevance as shown in this table

CR issues relevant to LGA

Governance topics have by far the highest relevance

Business ethics & business integrity

  • Customer privacyRelevance very high
  • ComplianceRelevance high
  • Cyber securityRelevance high
  • Corporate governanceRelevance high
  • Responsible marketing and fair salesRelevance high
  • Taxation policyRelevance moderate
  • Interaction with governmentsRelevance moderate

Product responsibility

  • Claims managementRelevance moderate
  • Risk managementRelevance moderate
  • EducationRelevance moderate
  • Product innovationRelevance moderate

Employees

  • Long term leadershipRelevance moderate
  • Employee engagementRelevance moderate
  • Diversity and equal opportunityRelevance moderate
  • Recruiting and retaining talentRelevance moderate
  • Training and further educationRelevance moderate
  • Employee inclusionRelevance moderate
  • Employee and director remunerationRelevance moderate
  • Occupational health and safetyRelevance moderate

Environmental protection

  • Material efficiency and waste reductionRelevance moderate
  • Energy efficiencyRelevance moderate
  • Investment in renewablesRelevance low
  • Waste and wastewaterRelevance low
  • Emissions to airRelevance low

Corporate citizenship

  • Community engagementRelevance moderate

Bold issues = top 10 CR issues relevant to LGA according results of the stakeholder CR survey
Relevance very high high moderate low

  • While internal stakeholders generally perceive LGA as performing quite positively in addressing these issues, many external stakeholders do not know what LGA is doing with regard to corporate responsibility (CR)
  • Most internal and external stakeholders are unaware of how LGA compares to its competitors in addressing these CR issues
  • According to internal stakeholders, a total of 10 relevant CR issues (3 of very high and 7 of high relevance) were identified for LGIMA

CR issues relevant to LGIMA

Governance topics have the highest relevance

Business ethics & business integrity

  • ComplianceRelevance high
  • Customer privacyRelevance high
  • Responsible marketing and fair salesRelevance high
  • Corporate governanceRelevance high
  • Cyber securityRelevance high
  • Interaction with governmentsRelevance moderate
  • Taxation policyRelevance moderate

Product responsibility

  • Risk managementRelevance high
  • Product innovationRelevance high
  • EducationRelevance moderate
  • Responsible ownershipRelevance moderate

Employees

  • Long term leadershipRelevance high
  • Employee and director remunerationRelevance high
  • Recruiting and retaining talentRelevance high
  • Diversity and equal opportunityRelevance moderate
  • Employee engagementRelevance moderate
  • Employee inclusionRelevance moderate
  • Occupational health and safetyRelevance moderate
  • Training and further educationRelevance moderate

Environmental protection

  • Energy efficiencyRelevance moderate
  • Material efficiency and waste reductionRelevance low
  • Waste and wastewaterRelevance low
  • Emissions to airRelevance low
  • Investment in renewablesRelevance low

Corporate citizenship

  • Community engagementRelevance moderate

Bold issues = top 10 CR issues relevant to LGIMA's Management and Board according results of the stakeholder CR survey
Relevance very high high moderate low

  • Compliance, risk management, and product innovation were considered the most relevant CR issue for LGIMA
  • According to LGIMA’s Management and Board, cyber security is expected to increase in relevance the most, followed by diversity and equal opportunity, employee engagement, recruiting and retaining talent, and training and further education

Methodology

In November 2015 a total of 162 stakeholders provided opinions of our US based businesses. This included board members, employees, NGOs, community groups and regulators.

Competitive benchmarking

We also chose to benchmark both LGIMA’s and LGA’s performance against competitors. This enabled us to see how well we perform on CR performance and communication. Our performance was compared against AIG, BlackRock, NISA, PIMCO, Protective, Prudential, and Transamerica.

Each business was given a relative position in their respective markets.

Results and action for Legal & General America

Following a review of the materiality analysis a number of recommendations were made for the LGA Board.

This included the need to increase local communication to its local stakeholders and make them aware of the strong CR performance that is occurring within the organisation, instead of defaulting to the group’s stance i.e.:

  • What is the businesses view on emerging health trends?
  • Which NGOs do we partner with on health and how have they improved our business?

We have already seen an increase in social media activity about LGA’s product performance since the review.

Enlarge image
Paying death benefits to beneficiaries is the real story behind our business (graph)

Results and action for Legal & General Investment Management America

We discussed a number of observations with the board including:

  1. How we need to develop a better understanding of how our institutional transactions have an impact on US citizens’ lives. For example, by refinancing a US pension scheme we are able to secure more stable pensions for more people. In this way we demonstrate how we are being economically and socially useful.
  2. How we could use the balance sheet of these businesses to support US infrastructure. The group has committed to place £15 billion of direct investments in UK housing, urban regeneration, energy and alternative investment. We need to understand how funds from our US Businesses can help US infrastructure grow over the long term.
  3. The need for increased transparency and greater investment in our corporate governance resources in the US. This will enable us to show US clients how active we are on ESG interventions in US based companies. Our recently launched corporate governance report highlights that LGIM are continuing to increase corporate governance activity with US Companies. In 2015 we increased the number of our US engagements to 97, from 94 in 2014 and 59 in 2013.

In conclusion, the materiality process showed that because the group now has an increased focus upon the US business, we need to provide a much more of a local narrative. It’s important that we provide content on responsible business policies for US stakeholders.

Where next for materiality?

For 2016–2017 we plan to look at how we can apply an independent materiality process across other parts of our group, including our joint ventures in India.

Target

Status

Deliver an independent materiality process for each company subsidiary in line with GRI 4.0 reporting to focus the strategy and approach on responsible business.

Achieved