Aegon UK to double ESG exposure in Workplace Default fund by investing £3bn in new BlackRock ESG index fund range
- Aegon worked with BlackRock on the development of a range of six ESG equity index mutual funds.
- This new range, along with a BlackRock ESG fixed income index fund, will become underlying funds for the Aegon Workplace Default fund, doubling its ESG exposure from 30% to 60% for growth stage investors.
- Aegon UK will transition £3 billion of assets into the new funds by including the funds in the flagship Aegon Workplace Default, and a range of other Aegon default fund options.
- On completion in Summer 2022, Aegon UK will have transitioned an estimated £15 billion into ESG strategies across its range of default funds over the last three years.
- The move is a key step towards Aegon UK’s target to make its default pension funds carbon net-zero by 2050, and to half carbon emissions between 2019 and 2030, in line with the Paris Agreement.
Aegon UK is increasing the ESG exposure in its Aegon Workplace Default fund – the in-house default fund in its Workplace Solutions offering – and a number of other Aegon default fund options, by investing £3 billion in a range of new UK-domiciled ESG index mutual funds launched by BlackRock. The move is part of Aegon UK’s wider drive to support the transition to a low carbon economy.
The new range of six iShares ESG equity index funds track newly launched Morningstar ESG Enhanced indices covering regional and country-specific exposures. Aegon UK worked with BlackRock on the design of these funds, which set a new standard for sustainable index investing in the UK market. The new fund range 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, reducing carbon emissions intensity while remaining close to the parent benchmark. The new fund range also addresses the increasing demand for investment strategies that enable a transition to greater sustainability.
The new indices target a 30% reduction in carbon emissions intensity and apply a set of exclusionary screens to limit exposure to controversial companies. The securities are then reweighted to favour those with stronger ESG attributes. The innovative 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.
Using these funds, as well as an existing BlackRock ESG fixed income fund, ESG exposure in the Aegon Workplace Default fund will double for investors still in the growth stage of their retirement journey from 30% to 60%, and increase to 40% for those in retirement. A number of other Aegon default fund options will also start to use the new BlackRock funds. Importantly, fund charges, risk appetites and performance expectations will remain unchanged.
The move is the latest step in Aegon UK’s commitment to achieve a carbon net-zero position for its default funds by 2050, with carbon emissions halved between 2019 and 2030. On completion of this latest step in their journey, Aegon will have transitioned an estimated £15 billion into ESG strategies within its default funds in just three years.
Tim Orton, Aegon’s Managing Director for Investment Solutions, said:
“We are excited to have worked with BlackRock on this new range of index-based funds and I’m proud that Aegon UK is setting the standard when it comes to sustainable index investing in a workplace default fund.”
“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 and aligning to the Paris climate accords. The progress we have made in this area also demonstrates our commitment to manage the risks associated with climate change.
“Around 90% 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.”
Sarah Melvin, Head of UK at BlackRock, said:
“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. BlackRock’s purpose to help more and more people experience financial wellbeing is strongly aligned to that of Aegon UK.
“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.”
Notes to Editors
About the Morningstar ESG Enhanced Index methodology:
The Morningstar ESG Enhanced Index methodology applies a set of ten exclusionary screens to limit each fund’s exposure to controversial activities. In addition, companies with a severe controversy score, as defined by Sustainalytics, the ESG data-provider which is also part of Morningstar, are excluded, as well as those with a missing ESG risk rating or controversy score.
The securities are then re-weighted with the goal of optimising for ESG characteristics while maintaining the risk profile of the parent universe. Moreover, the indices have an explicit 30% decarbonisation target relative to their parent indices, to respond to the increasing demand from UK investors for climate aware investment products.
About the iShares ESG Enhanced Equity Index fund range:
Please refer to fund factsheets for full fund details and fund-specific risks:
- In the UK, Aegon offers pension, investment and protection solutions to over 3.8 million customers. Aegon employs over 2,000 people in the UK and together with over 1,000 people employed by Atos, we serve the needs of our customers. More information: www.aegon.co.uk Figures correct as at 31/12/2020
- Aegon UK is part of the wider Aegon Group, based in the Netherlands, whose roots go back to the first half of the nineteenth century. Since then, Aegon has grown into an international business, with 30.4 million customers in multiple countries and EUR 979 billion of revenue generating investments as at 30/09/2021. More information on www.aegon.com
The information in this press release is intended solely for journalists and shouldn’t be relied upon by any other persons to make financial decisions.
 iShares ESG Sterling Corporate Bond Index fund launched in September 2021