Scottish Widows has begun work with its fund management partners to divest at least £440m from companies which do not meet its ESG standards under a new exclusions policy.
The insurer's new policy is set to benefit around six million UK savers, with exclusions to be applied across the group's life, pension and open-ended investment company funds - including its flagship workplace default - and will apply to index trackers as well as its own active funds.
Companies which derive more than 10% of their revenue from thermal coal and tar sands, along with manufacturers of controversial weapons, will be excluded.
Violators of the UN Global Compact on human rights, labour, environment, and corruption will also fall under the new exclusions policy, unless the insurer can influence positive change due to the size and type of investment.
Scottish Widows will also work with its investment partners to apply the exclusions to external pooled funds in the future - those it manages on behalf of a range of institutions.
The firm said this would benefit even more UK savers in the future, stating its divestment figure of £440m "could grow much further" if companies did not take action to improve the sustainability of their business practices.
Head of pension investments Maria Nazarova-Doyle said Scottish Widows has "a vital role to play" in "shielding customers from ESG investment risks".
"We recognise there's more we can do as a company and that this is just one step in the journey," she added.
"Our exclusions focus on companies we believe pose the most severe investment risk due to the nature of their businesses, which can't be addressed through engagement."
The new exclusion policy comes four months after Scottish Widows invested £2bn of pension fund assets to become the inaugural investor in BlackRock's Climate Transition World Equity Fund.
The fund - which backs businesses that decrease carbon emissions, increase clean technology revenue and display more efficient water and waste management - also makes significant ESG exclusions.
Asset manager Robeco has set a goal to reach net-zero greenhouse gas emissions across all its investments by 2050.
The winners of the Professional Pensions Investment Awards 2020 have been announced.
Legal and General Retirement (LGR) has committed to cutting the carbon emission intensity of its annuity book by half by 2030, while the overall group targets a net-zero portfolio by 2050.