ESG enhancements to the Universal Balanced Collection and other Aegon funds

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In response to increasing demand from investors for environmentally and socially responsible investments, BlackRock has made a number of changes to five BlackRock ACS trackers, which form key building blocks for the Universal Balanced Collection (UBC) and a number of other Aegon funds. These changes were effective from 31 July 2021.

BlackRock has changed the indices the funds track to environmental, social and governance (ESG) screened indices. The BlackRock funds changing, and details of their old and new indices are:

  • BlackRock ACS World ex UK Equity Tracker
    Old index: FTSE All World Developed ex-UK 
    New index: FTSE All World Developed ex-UK ESG Screened
  • BlackRock ACS European Equity Tracker
    Old index: FTSE All World Developed Europe ex-UK
    New index: FTSE All World Developed Europe ex-UK ESG Screened
  • BlackRock ACS Japan Equity Tracker
    Old index: FTSE Japan
    New index: FTSE Japan ESG Screened
  • BlackRock ACS UK Equity Tracker
    Old index: FTSE All Share
    New index: FTSE All Share ESG Screened
  • BlackRock ACS US Equity Tracker
    Old index: FTSE USA
    New index: FTSE USA ESG Screened

These funds are the underlying funds for the Aegon Diversified Growth fund, which makes up around 70% of the Universal Balanced Collection and Universal Lifestyle Collection (growth stage) as well as the Universal Balanced Collection (Flexible target) and Universal Balanced Collection (Annuity Target). The changes mean that around a quarter of the UBC is invested in ESG-screened strategies.

You can find a list of funds affected under ‘Which Aegon funds are affected?’ below.

How have the BlackRock ACS tracker funds changed?

BlackRock has changed the indices that these five funds track from the parent index¹ to an environmental, social and governance (ESG) screened version of the index. So, where a parent index may hold 700 constituents, for example, the ESG-screened version of the index may only hold 600.

BlackRock believes that this change is the most cost-effective way for investors to access the ESG versions of these exposures. Key benefits include retaining scale in the funds (keeping members’ costs low) and maintaining current liquidity levels.

These new screens mean that companies engaged in controversial industries will be excluded from the funds. This includes companies deriving revenue from:

  • controversial weapons, including small arms and nuclear weapons
  • thermal coal
  • oil sands
  • activities that violate the United Nations Global Impact (UNGC)

BlackRock shares our belief that companies engaged in these activities bring significant risks from an investment perspective, as well as being at odds with many customers’ values.

How will this affect those invested in the affected funds

The objectives, risk rating and charges of the funds affected (see the full list below) won’t change. While the screened indices mean that the underlying BlackRock funds will invest in fewer companies compared with the parent index¹ they previously tracked, returns and risk are expected to remain very similar, although there’s no guarantee of this.

Which Aegon funds are affected?

This affects numerous funds across our platforms.

Below the funds on each of our main platforms are listed with an indication of the new weightings in ESG-screened funds. Where we refer to lifestyle funds, the proportion mentioned relates to the growth-stage asset mix.

TargetPlan:

Fund (weighting in ESG-screened funds)

  • BlackRock LifePath default funds (around 75%)²
  • Aegon BlackRock Balanced Index (BLK) (around 75%)
  • Aegon BlackRock Consensus Index (BLK) (around 70%)
  • Aegon BlackRock 40/60 Global Equity Index (BLK) (100%)
  • Aegon BlackRock 70/30 Global Equity Index (BLK) (around 70%)
  • Aegon BlackRock World (ex-UK) Equity Index (BLK) (100%)
  • Aegon BlackRock UK Equity Index (BLK) (100%)
  • Aegon BlackRock European Equity Index (BLK) (100%)
  • Aegon BlackRock Japanese Equity Index (BLK) (100%)
  • Aegon BlackRock US Equity Index (BLK) (100%)
  • Aegon BlackRock Aquila Life 65:35 Global Equity (BLK) (around 95%)
  • Aegon BlackRock Aquila Life UK Equity (BLK) (100%)
  • Aegon BlackRock Aquila Life US Equity (BLK) (100%)
  • Aegon BlackRock Aquila Life World (Ex UK) Equity Index (BLK) (100%)

Aegon Master Trust:

Fund (weighting in ESG-screened funds)

  • Aegon BlackRock UK Equity Index (BLK) (100%)
  • Aegon BlackRock World (ex-UK) Equity Index (100%)

Aegon Retirement Choices (ARC):

Fund (weighting in ESG-screened funds)

  • Universal Balanced Collection (ARC) (around 25%)
  • Universal Lifestyle Collection (ARC) (around 25%)
  • Universal Balanced Collection (Flexible Target) (ARC) (around 25%)
  • Universal Balanced Collection (Annuity Target) (ARC) (around 25%)
  • Aegon BlackRock 75/25 Equity and Bond Tracker (ARC) (around 70%)
  • Aegon BlackRock 75/25 Equity and Bond Index Lifestyle (ARC) (around 70%)
  • Aegon BlackRock Consensus (ARC) (around 65%)
  • Aegon BlackRock Consensus Lifestyle (ARC) (around 65%)
  • Aegon BlackRock 40/60 Global Equity Tracker (ARC) (100%)
  • Aegon Blackrock 40/60 Global Equity Index Lifestyle (ARC) (100%)
  • Aegon BlackRock European Equity Tracker (ARC) (100%)
  • Aegon BlackRock Japanese Equity Tracker (ARC) (100%)
  • Aegon BlackRock UK Equity Tracker (ARC) (100%)
  • Aegon BlackRock US Equity Tracker (ARC) (100%)
  • Aegon BlackRock World (ex-UK) Equity Tracker (ARC) (100%)

Traditional products:

Fund (weighting in ESG screened funds)

  • Universal Balanced Collection (around 25%)
  • Universal Lifestyle Collection (around 25%)
  • Universal Balanced Collection (Flexible Target) (around 25%)
  • Universal Balanced Collection (Annuity Target) (around 25%)
  • Aegon BlackRock 75/25 Equity and Bond Tracker (around 70%)
  • Aegon BlackRock 75/25 Equity and Bond Tracker Lifestyle (around 70%)
  • Aegon BlackRock Consensus (around 65%)
  • Aegon BlackRock Consensus Lifestyle (around 65%)
  • Aegon BlackRock 40/60 Global Equity Tracker (100%)
  • Aegon Blackrock 40/60 Global Equity Tracker Lifestyle (100%)
  • Aegon BlackRock European Equity Tracker (100%)
  • Aegon BlackRock Japanese Equity Tracker (100%)
  • Aegon BlackRock UK Equity Tracker (100%)
  • Aegon BlackRock US Equity Tracker (100%)
  • Aegon BlackRock World (ex-UK) Equity Tracker (100%)

In some cases, the weightings to ESG are approximate and may fluctuate depending on cash flows and other factors.

For more information, you can view the fund factsheets via the ‘Fund prices and performance’ page and viewing ‘TargetPlan’, ‘Aegon Retirement Choices (ARC)’ or ‘Other fund ranges’.

What current investors need to do

Existing investors don’t need to do anything. Please speak to a financial adviser if you’re unsure about what this change means for you. If you don’t have a financial adviser you can find one in your area at moneyhelper.org.uk.

Important information

The value of investments can go down as well as up and isn’t guaranteed. Investors may get back less than the amount invested.

¹ The parent index is the index the funds previously tracked. For instance, the parent index of the BlackRock ACS UK Equity Tracker fund was the FTSE All Share. The new index is the FTSE All Share ESG Screened Index, which contains the same companies minus those that are excluded due to the ESG screen.

² There is a small ACS tracker holding in LifePath, and these changes effectively mean all developed market equity exposure (excluding small cap) will now be accessed through an ESG-component fund. In the growth phase this will take the ESG exposure up slightly from 68% to around 75% as at 19 July 2021. Based on current assumptions on LifePath UK assets under management of around £8.5 billion. For illustrative purposes only. Actual allocations and implementation may change. Those closer to retirement will have a lower allocation to ESG strategies.