Over £5bn of Aegon UK workplace default assets now moved into ESG strategies
Aegon UK has reached a major milestone in its efforts to transition its workplace default funds to net zero. Since it began the process last July, more than £5 billion of customer money has been shifted into ESG investment strategies (as at end March 2021). And by the end of June, Aegon plans to transition a further £3.5bn, which will bring the total to over £8.5 billion.
The decision to act now will contribute towards Aegon’s wider ambitions to make its workplace default funds net carbon zero by 2050, and to halve carbon emissions by 2030.
As a result of the changes Aegon’s TargetPlan LifePath default funds now have 68% of assets for growth stage savers invested in ESG screened and optimised index funds from BlackRock. The funds seek to maximise exposure to positive ESG factors, including reducing carbon emissions and carbon reserves intensity, while exhibiting risk and return characteristics similar to those of the equivalent non-ESG index.
Key Workplace ARC default funds, including the in-house Aegon Workplace Default fund, now also have around a 30% allocation for growth stage investors to the HSBC Developed World Sustainable Equity Index fund, which seeks to target a 20% increase in ESG ratings, a 50% reduction in carbon emissions intensity and 50% reduction in fossil fuels reserves intensity1.
Aegon is also now announcing the next stage in its transition programme, which will see around a quarter of Aegon’s Universal Balanced Collection, and its associated lifestyle fund variants, move to ESG strategies for growth stage investors. The Universal Balanced fund is Aegon’s largest default fund, and by the end of June this transition will add an additional £3.5 billion to the £5 billion already moved.
There is an increasing expectation among customers that their savings be invested in a sustainable way and in a recent survey2 77% agreed that climate change is an important risk to consider when investing for the future. Nearly half (45%) felt more strongly and wanted to see investing for a net-zero carbon future made mandatory.
While there is an expectation that their savings will be invested sustainably, Aegon has also found that just 15%³ of people say they invest in ESG strategies. The reality is that many of those invested in a workplace pension, are now likely to have an exposure to ESG funds through their savings.
Commenting on the news, Tim Orton, Managing Director for Investment Solutions said:
“Action is needed now to make a difference to the future world we will live in. We’re committed that our longer-term targets, such as our 2050 commitment to net zero carbon emissions, are accompanied by actions now in the drive towards it. I’m delighted we’ve hit our first milestone and reached £5bn of our Pension scheme assets transitioned to lower carbon ESG strategies.
“£14 billion was paid into defined contribution pension schemes in 20194 making them a major source of investment. The scale of the assets involved means pension providers have a real opportunity to make a difference and to invest in a way that will help create a lower carbon future. We want to continue to lead the way on this.”
1 The fund uses the FTSE Russell ESG Score, which is based on an assessment of 7,200 securities in 47 markets. Carbon emissions and fossil fuel reserve targets are relative to the FTSE Developed World Index ESG screens.
2 Research was carried out with 1,375 consumers on Aegon’s research panels in December 2020.
3 Customer research carried out by Aegon using customer panel. Sample size 1,487. December 2020
4 ONS UK pension surveys: redevelopment and 2019 results
Head of PR
Notes to Editors
- In the UK, Aegon offers retirement, workplace savings and protection solutions to over three million customers. Aegon employs around 2000 people in the UK and together with a further 800 people employed by Atos, we serve the needs of our customers. More information: www.aegon.co.uk
- Aegon’s roots go back more than 175 years – to the first half of the nineteenth century. Since then, Aegon has grown into an international company, with businesses in the Americas, Europe and Asia. Today, Aegon is one of the world’s leading financial services organisations, providing life insurance, pensions and asset management. Aegon’s purpose is to help people achieve a lifetime of financial security. More information on www.aegon.com
- Figures correct, January 2021