Phoenix Group is launching a new ESG DC default solution for Standard Life schemes that tilts up green technology solutions by 50 per cent and reduces carbon intensity down by the same proportion.
The new Standard Life Sustainable Multi Asset ESG Default solution will launch mid-December 2020 and will blend three responsible investment approaches – screening, tilting and stewardship. Exclusions will include thermal coal and unconventional gas, and UN Global Compact violators.
At launch 64 per cent of the asset allocation will be made up of ESG components, increasing to over 90 per cent in Q2, 2020. Growth phase asset allocation comprises 59.84 per cent Sustainable Index World Equity, 7.6 per cent Emerging Markets Stock Index, 8 per cent Global Property, 10 per cent Sterling Corporate Bond Tracker, 7 per cent Global Corporate Bond Tracker, 3 per cent Global Inflation Linked Tracker, 4.56 per cent Sustainable Index UK Equity. Most components are provided by Aberdeen Standard Life.
From 1 October 2019, Trustees have had a statutory obligation to specify their policies in relation to “financially material considerations” including those involving the ESG factors taken into account in the selection, retention and realisation of investments.
Standard Life DC scheme members now have access to an increased range of 12 self-select responsible investment funds with plans to expand this further.
Phoenix says the launch also highlights its ongoing investment in its growing workplace business operating under the Standard Life brand. Yesterday Phoenix announced it had become a signatory to the UN Principles of Responsible Investment, becoming its largest UK asset owner signatory.
Standard Life head of investment solutions Gareth Trainor says: “Responsible investment is a central consideration in all the workplace pension solutions we offer. But we’re delighted we will be launching our new more focused ESG default for DC pension clients and their members before the end of the year. The demands placed on scheme default solutions continue to evolve. While delivering good member outcomes, value and rigorous governance is vital, responsible investment considerations have also become important to scheme members, policymakers and regulators alike. Our new ESG Default solution meets this demand. It’s a flexible solution, ultimately designed to provide good member outcomes by thinking more holistically about risks and opportunities.
“We’ve listened to feedback from stakeholders across the industry and sought input from our ESG experts to develop this solution. Placing ESG factors in the context of being ‘a financially material consideration’ helps identify areas that could have a positive or negative impact on the business model of a company that you are investing in. In particular, ensuring that these ESG factors have a financial benefit will align with trustees’ fiduciary duty to act in the best interest of members. Straying beyond these factors could be considered to be moral or ethical decision-making on behalf of members, something that the trustees or employer would need to canvas member opinion on.
“The challenge with any default fund is to meet the needs of a broader scheme membership in order to deliver a good retirement outcome while providing value and ensuring good governance. Given the wide range of views in the fields of responsible investments, the important questions for trustees and our industry is, will a default remain appropriate for the broad scheme membership, if it were to stray beyond these factors. This is an interesting area that our industry continues to debate. It’s also why we know it’s important to continue to expand our self-select range of responsible investment funds, to give those individual members who are looking for something specific when it comes to responsible investment the options.
“Given their established approaches to responsible investing and stewardship, Aberdeen Standard Investments is our key partner for this new solution. We have worked closely with them in developing these funds to ensure that they meet the needs of our members. Aberdeen Standard Investments will be providing the majority of the components within this new default.”
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