£5 billion of default assets moved into ESG funds
For intermediaries and employers only
I’m delighted to announce that we’ve reached a major milestone in our efforts to transition our workplace default funds to net zero carbon emissions. Since the process began last July, more than £5 billion of customer money has been moved into ESG investment strategies (as at end March 2021). And by the end of June, we plan to transition a further £3.5 billion, which will bring the total to over £8.5 billion.
The decision to act now will contribute towards Aegon’s wider ambitions to make our workplace default funds net carbon zero by 2050, and to halve carbon emissions by 2030.
As a result of the changes, our 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 have around 30% allocated to the HSBC Developed World Sustainable Equity Index fund for growth-stage investors. This fund targets a 20% increase in ESG ratings, a 50% reduction in carbon emissions intensity and 50% reduction in fossil fuels reserves intensity1.
I’m also pleased to announce the next stage in our 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 our 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 should be invested sustainably, just 15% of people say they invest in ESG strategies². 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.
Action is needed now to make a difference to the future world we will live in. We’re backing up our 2050 commitment to net zero carbon emissions with actions we believe will ensure we’re in the best position to meet our targets. I’m delighted we’ve hit our first milestone and reached £5 billion of our pension scheme assets transitioned to lower carbon ESG strategies.
£14 billion was paid into defined contribution pension schemes in 20193, 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.
The value of an investment can fall as well as rise and isn’t guaranteed. The final value of a member’s pension pot when they come to take benefits may be less than has been paid in. Please refer to fund factsheets for full fund details and fund-specific risks.
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 over 1,250 consumers on Aegon’s research panels in December 2020.
3 ONS UK pension surveys: redevelopment and 2019 results.