Our Commitment To Social And Environmental Stewardship In The Water Sector

Royal London Asset Management (RLAM) has been engaged with the water sector for over eight years. In 2023, RLAM launched a two-year engagement programme assessing 11 water utility companies in England and Wales across four pillars: climate change adaptation, biodiversity, affordability, and antimicrobial resistance (AMR). The programme was conducted in collaboration with six asset owner investor groups and produced 19 investor expectations.

Investing In The Water Sector

The UK water sector provides stable revenue streams and dependable cash flows. The 25 privately-owned water companies serve over 58.8 million customers (p.6). However, the sector faces a regulatory “trilemma” of balancing deliverability, affordability, and finance-ability, compounded by ageing infrastructure and pollution incidents.

Engagement With The Water Sector

Conducted from September 2023 to January 2025, the programme engaged 11 major water sector holdings, receiving responses from all companies and conducting meetings with eight (p.8). RLAM assessed company business plans developed for the 2024 Price Review (PR24), covering the 2025–2030 period.

Overall Progress During The Two-Year Engagement Programme

There was significant improvement from baseline scores across the 11 companies assessed. Nearly all companies showed improvements, particularly in biodiversity. Only two companies scored below the baseline, primarily due to poor pollution performance and a lack of ambition in climate adaptation and biodiversity (p.11).

Climate Change Adaptation

Companies are increasingly investing in digital capabilities to reduce pollution. Examples include Anglian Water targeting a 46% reduction in total pollutions and a 72% reduction in serious pollutions by 2030, and Yorkshire Water expanding its smart metering framework to install over one million devices by 2030 (p.13). Challenges persist around ageing infrastructure — Welsh Water experiencing nearly 2,000 sewer blockages a month would take over 700 years to replace its entire sewer network at the current rate (p.14).

Biodiversity

Biodiversity showed the most notable improvement. Ofwat’s biodiversity performance commitment for 2025–2030 has catalysed action. Investment examples include Anglian Water doubling its environmental investment to £4 billion to achieve 22 biodiversity units, and Severn Trent aiming to invest £39.4 million to enhance biodiversity across 15,000 hectares by 2030 (p.16). Challenges remain around lack of robust baseline data and inconsistent SSSI management and reporting.

Affordability

Over half of water bill payers (53%) frequently struggle with household expenses, and 20% find it difficult to pay their water bills (p.18). Companies are expanding social tariffs and hardship funds. Welsh Water is allocating £64 million over five years to benefit 132,000 customers, and Anglian Water aims to provide direct financial support to 280,000 customers (p.18). Challenges remain in reaching all eligible customers and embedding affordability into long-term planning.

Antimicrobial Resistance (AMR)

Wastewater is recognised as a significant contributor to AMR. While some companies are investing in advanced disinfection technologies and participating in collaborative research, sector-wide engagement remains at an early stage. Pilot projects — such as Anglian Water’s green prescribing initiative linked to wetland restoration — show potential. The absence of clear regulatory guidance has contributed to uneven progress (p.22).

Conclusion

The 11 companies collectively serve 61.8 million customers, employ 41,500 people, and have planned investment of £89.25 billion for 2025–2030 (p.11). RLAM encourages all investors to adopt its 19 investor expectations. Ongoing stewardship will focus on pollution control, climate-related physical risks, and biodiversity.