Aegon is investing £3bn of its workplace default fund into a new range of BlackRock’s ESG index funds — effectively doubling exposure to sustainable investments for growth stage investors.
Growth stage investors will have 60 per cent of their fund invested in these ESG strategies, whereas previously it was just 30 per cent. Those in retirement will have a 40 per cent exposure to these new ESG funds.
Aegon says it has worked with BlackRock to develop these six new iShares ESG equity index funds, which track newly launched Morningstar ESG Enhanced indices covering regional and country-specific exposures. Aegon is also using an existing BlackRock index fund for fixed income exposure.
Aegon says these funds “set a new standard for sustainable index investing” in the UK market. The funds aims to meet the needs of clients, advisers and pension scheme members for core replacements of standard building blocks that maximise a fund’s ESG credentials, by reducing carbon emissions intensity while remaining close to the parent benchmark.
The indices target a 30 per cent reduction in carbon emissions intensity and apply a set of exclusionary screens to limit exposure to controversial companies. The securities are then re-weighted to favour those with stronger ESG attributes. The methodology aims to maintain risk characteristics in line with standard market benchmarks and manage emerging ESG tail risks, a critical requirement when building diversified portfolios.
Aegon will invest this money into these new funds over the coming months with the £3bn expected to be fully invested by summer 2022. It says that once this latest investment is complete the firm will have transitions some £15bn into ESG strategies across its range of default funds over the last three years.
Aegon says this latest announcement is part of its ongoing commitment to achieve a carbon net-zero position for its default funds by 2050, with carbon emissions halved between 2019 and 2030.
Aegon’s managing director for investment solutions, Tim Orton, says: “Enhancing the ESG credentials and overall exposure in our Aegon Workplace Default fund, and others, is a significant step for Aegon UK as we move closer to achieving our net-zero commitments for default funds.
“Around 90 per cent of scheme assets are often invested in passive default funds and therefore we have a responsibility to ensure our investment actions are meeting the evolving needs of our customers.”
BlackRock head of UK Sarah Melvin adds: “We are delighted to be working with Aegon UK to create the investment solutions needed to help fulfil their net zero ambitions and investment principles.
“This new range will help pension savers incorporate sustainable considerations into their retirement portfolios as they look to secure their financial futures. We continue to work with clients to help them navigate the energy transition and offer them more choice when seeking to implement their sustainability goals.”
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