Increasing ESG in the Aegon LifePath portfolios

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BlackRock is increasing the exposure to investments that have Environmental, Social and Governance (ESG) credentials in the LifePath funds. They’re also changing the asset allocations of the funds to improve representation of global equity markets – to do this, exposure to UK equities will be reduced.

The Aegon BlackRock LifePath portfolios are available to workplace investors via our Aegon TargetPlan and Aegon Master Trust fund ranges.

These changes are expected to improve ESG scores and reduce carbon emissions intensity¹, and won’t impact the portfolios’ investment objectives, benchmark or charges. The changes have already started to take place, and should be complete by mid-2021.

Which funds are affected?

The changes affect the following portfolios:

  • Aegon BlackRock LifePath Flexi
  • Aegon BlackRock LifePath Retirement
  • Aegon BlackRock LifePath Capital

Why is BlackRock increasing ESG investments?

BlackRock believes that environmental, social and governance issues can have a positive impact on long-term financial performance, although there’s no guarantee. Therefore it’s important to integrate these factors into the investment decision-making process across all its portfolios. This is something that Aegon also believes and we welcome this change.

How much will BlackRock allocate to ESG investments?

The LifePath portfolios already hold some ESG investments.  Between September 2020 and mid-2021, this will increase from 27% to 68% for LifePath investors planning to retire in 2050 and beyond.²

LifePath portfolios automatically reduce exposure to riskier assets such as equities (shares) as investors approach their target retirement date, and at present all the ESG investments used by LifePath are equities. So portfolios for those who are close to retirement will hold less ESG investments because they have a lower exposure to equities than investors whose retirement is still some way off.

How we’re making the change

To make this change, the LifePath strategies are increasing their existing investment in the ACS World ESG Equity Tracker fund. And from next year they’ll also start to invest in the MSCI World ESG Screened index.

BlackRock is also changing the asset allocations of the funds, reducing the exposure to UK equities in favour of global equities to remove the ‘home bias’ currently in the funds. You can see the changes in more detail in the table below:

LifePath Early Days Fund³

Investment type Current allocation Target allocation4
Developed world ESG equity 28.0% 34.0%
Developed world screened equity 0.0% 34.0%
UK equity 14.6% 0.0%
Developed ex-UK equity 34.5% 4.3%
Global ex-UK developed small cap equity 9.3% 9.4%
Emerging market equity 8.8% 13.3%
Global real estate 4.9% 4.9%

Source: BlackRock as of 30 September 2020. The figures above reflect current assumptions based on LifePath UK assets under management of £5.9 billion. For illustrative purposes only. Subject to change without notice. Actual allocations and implementation may change. There is no guarantee that the investment strategy can be successful, and the value of investments may go down as well as up.

³The Early Days Fund is a catch-all representing the fund as it is for those due to retire later than 2050 i.e. before the asset mix starts to change to prepare savings for retirement. Asset allocations will differ for those due to retire earlier. ⁴Target allocation date is mid-2021.

BlackRock will make these changes gradually to reduce the impact of market movements and the costs of buying and selling assets.

More about ESG investments

ESG is a term used to describe ways of responsible investing. It can cover a variety of approaches and themes but mainly covers the consideration of Environmental, Social and Governance related areas in the management of investment funds. Examples of ESG-related considerations are shown below:

Environmental Social Governance Governance
  Climate change   Human rights   Board independence
  Energy efficiency   Product safety and liability   Board diversity
  Waste and pollution   Workplace safety   Anti-corruption policies
  Water use and conservation   Workplace benefits   Shareholder rights
  Deforestation   Employee relations   Compensation structures
  Natural resource use   Diversity/inclusion policies   Corporate political contributions
  Sustainability initiatives   Data protection   Corporate behaviour/corruption
  Clean technology   Community involvement    
  Green buildings   Nutrition and health Supply chain sourcing    
  Renewable energy        

Find out more

You can find out more about LifePath portfolios, including information on fund-specific risks, on our website or by logging in to TargetPlan. Please speak to a financial adviser if you’re unsure about what these changes mean for you. If you don’t have a financial adviser, you can find one in your area on the Money Advice Service website. There may be a charge for advice.

Please be aware that the value of investments can go down as well as up and isn’t guaranteed. You may get back less than the amount invested.

¹ Source: BlackRock as of 30 September 2020. For illustrative purposes only. Measures calculated using only the equity and corporate bond portions of the portfolio, as ESG data is unavailable for the other asset classes. The ESG Adjusted Score is calculated as the weighted average of the underlying holdings’ ESG Scores. It is provided on a 0-10 scale, with 0 and 10 being the respective lowest and highest possible scores. MSCI scores underlying holdings according to their exposure to 37 industry specific ESG risks and their ability to manage those risks relative to peers. Weighted average Emissions intensity measured as metric tonnes / $ million total sales. The ratings, metrics, methodologies and scores may differ from those of other providers.

² Source: BlackRock as at 30 September 2020. The asset allocation figures are based on current assumptions and LifePath UK assets under management of £5.9 billion. For illustrative purposes only. Subject to change without notice. Asset allocations and implementation may change.