Aegon UK is investing £3 billion in a range of new UK-domiciled ESG index mutual funds by BlackRock.
The move will double Aegon UK’s ESG exposure in its Workplace Default fund and is part of the group’s wider drive to support the transition to a low carbon economy.
On completion this summer, Aegon UK will have transitioned an estimated £15 billion into ESG strategies across its range of default funds over the last three years.
The new range of six iShares ESG equity index funds will track the newly launched Morningstar ESG Enhanced indices covering regional and country-specific exposures.
The new indices target a 30% reduction in carbon emissions 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.
By using these funds, as well as an existing BlackRock ESG fixed income fund, ESG exposure in the Aegon Workplace Default fund will double from 30% to 60% for those in the growth stage of their retirement journey and increase to 40% for those in retirement, the group said.
It marks 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.
Tim Orton, managing director for investment solutions at Aegon, 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, added: “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.”
