Group CEO’s statement
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We’ve an important purpose which as well as delivering growth for our investors, is designed to help customers build financial security and the whole of society to benefit from our economically and socially useful activities.
Our six growth drivers, which inspire our strategy, mean we can create business opportunities directly linked to the main global trends which affect us all. These include the need to ensure that people enjoy secure and rewarding retirement years, the importance of helping people create financial resilience through insurance and saving, the urgency to build homes, improve our infrastructure, develop green energy and stimulate economic growth and the importance of harnessing digital opportunities.
Ageing populations mean that pension savings need to last longer. The number of people in the UK aged 75 and over is projected to rise to 10 million by 2040.
Globalisation of asset markets
Global wealth assets exceed $70 trillion. Our share is only around 1.5%, so we’re exporting more of our skills internationally.
Creating new real productive assets
There’s an urgent need to invest in infrastructure and urban regeneration. Pension assets need to be invested over the very long term and we can improve returns and benefit the economy by investing in this way.
Reform the welfare state
Many families that rely on state benefits struggle to survive financially following death, disability or long-term sickness. Greater use of private insurance can help to build financial independence.
Consumers are increasingly seeking digital access and low-cost solutions for financial services products.
Providing today's capital
In recent years, equity investment capital has been in short supply. Institutional funds need stable long-term returns. Investing in start-up businesses creates the companies of the future and stimulates economic growth.
I’m pleased that our achievements in 2016 were strongly aligned with our growth drivers and our aim to improve people’s lives. Our annual report covers more aspects on our growth drivers.
Growing our business
We grew our business by increasing our total assets under management to £894billion, making us one of Europe’s largest asset managers and giving us massive responsibility to care for the savings of people in the UK and the US, millions of whom are entrusting us with their future pensions. We also wrote record amounts of pensions risk transfer business, which means that many more people can be confident that their pensions will now be paid on time and in full.
Our total direct investments reached over £10 billion in total. We invested in new homes to rent and to buy, we expanded our urban regeneration projects in places like Salford, East London, Bracknell, Cardiff and Leeds, we put £250 million into onshore wind energy projects and we made a £500 million investment in UK small and medium-sized businesses.
I’m proud of our financial success, but I’m also delighted that 2016 saw so many new initiatives aimed at improving not only the way our business is run, but also business ethics in all the countries where we operate.
- We continued working with the Living Wage Foundation to ensure that we keep improving labour standards as an employer and as a procurer
- We’ve worked with Anti-Slavery International to fine tune our work around the Modern Slavery Act
- I had the privilege of chairing the ‘Mission-led Business Review’, which promotes businesses that can make a positive social impact in their work
- We signed the ‘Women in Finance Charter’ which aims to improve gender diversity and increase the number of women in senior leadership positions across the financial
Our people in the UK, the US and India work tirelessly to help those people in their local communities who can benefit from our financial and physical help, through our work with charities and third sector organisations. In 2016 we contributed over £3 million into UK and US non-profit organisations.
Looking to the future, we’ve set ourselves a number of challenging five year targets, to take measurable action on the economy, society and the environment. These cover four priority areas of sustainable behaviour.
- Shifting to a low carbon economy
We want our business, the businesses we work with and governments in all the countries we operate, to help reduce the effects of climate change through low carbon solutions. We have already invested in green energy and want to provide capital for 5% of UK clean energy by 2021. We also aim to finance the building of low-carbon, energy efficient housing. We will engage with the boards of those companies in which we invest in the UK, the US and other regions to influence them to adopt low carbon policies.
- Making society more resilient with our financial solutions
We aim to improve our insurance products and services to support emerging vulnerabilities in our customers’ lives and design and distribute our products to make them more accessible, more transparent and simpler to buy. We want to invest in housing that benefits people who cannot afford to buy through institutionalising rental schemes, both through fairer private rental schemes and social housing.
- Creating new investments for the future
We have already committed to invest £15 billion into long-term direct investments and aim to extend this further. We want to create jobs and economic growth by investing £10 billion of funding into small and medium-sized businesses and invest in major regeneration schemes in at least 10 UK cities.
- Running our business to a higher standard in the next 12 months
In 2017, we will start out on the journey to build an even more customer focused culture. Our investment management business will informally invite external stakeholders to review and strengthen our corporate governance and sustainability policies. At the same time we will go further on our Environmental Social Governance policies by engaging with governments and companies on pay ratios, engaging with US companies on gender diversity and expanding on the Future World Fund to help clients decarbonise.
In 2016 we embedded a new corporate purpose, business principles and behaviours in our employees’ ways of working. In 2017, we aim to go further by linking the performance of our six businesses to these principles and behaviours.
Group Chief Executive Officer