Nest invests in BlackRock’s LEAF

Tree-lined highway

The National Employment Savings Trust (Nest) has become an investor in Blacrock’s  Institutional Cash Series (ICS) Sterling Liquid Environmentally Aware Fund (LEAF).  

Nest is one of the UK’s top five DC pension schemes and is forecast to grow to GBP20 billion in assets under management by 2022.  The demand for sustainable cash is rapidly growing with interest from a diverse client set, including corporates, private banks, wealth managers, universities, charities and pension schemes. 

BlackRock launched the BlackRock ICS Liquid Environmentally Aware Fund (LEAF) series in July 2019 to introduce sustainability to the world of money market funds and meet growing demand for sustainable cash solutions in Sterling, Euro and US Dollar.  The LEAF series is the first range of money market funds of its kind, launched with the thematic purpose of tilting investments towards environmental factors, as well as social and governance considerations, while maintaining the core objectives of liquidity funds. The LEAF series are Short Term Variable Net Asset Value Funds.

The sustainable focus of the LEAF series is demonstrated through three key features.  Firstly, the funds use exclusionary screens prohibiting investment in certain issuers, including fossil fuels, civilian firearms and tobacco.  Secondly, the funds only invest in issuers who at the time of investment, have better than average performance in environmental practices, as determined by MSCI.  Finally, 5% of the net revenue of the funds is used to purchase and retire carbon offsets.

The investment in ICS Sterling LEAF follows Nest’s statement in June 2019 that it would be banning tobacco from the entirety of its portfolios and, where possible, begin to transition assets into sustainable strategies.  Nest said the decision was based on the expected future performance of the tobacco industry.  Simultaneously, BlackRock was working to launch the LEAF series, which screens out tobacco and follows sustainability-focused investment criteria.

Mark Fawcett, Chief Investment Officer at Nest, says: “Assessing ESG factors when investing sheds light on how adaptable a company or industry is and how sustainable it will be in the years to come.  We believe it helps achieve stronger long-term, risk-adjusted returns.  We welcome new ways to better meet our needs as investors and commend BlackRock for offering this innovative approach.  It is important that fund managers step up and show their commitment to responsible investment.”

Alex Cave, Head of UK Institutional DC at BlackRock, says: “More and more of our DC clients have been focused on the impact of sustainability on their portfolios.  LEAF provides our clients with market-leading, environmentally-focused and sustainability-integrated money market access.  Nest is critical for the growth and success of the UK DC market; we are excited to extend our partnership with them and look forward to working together on the evolution of their investment offering built for a new generation of DC savers.”

Peter Loehnert, Head of International Cash Management at BlackRock, adds: “We are delighted that Nest has chosen to build on its partnership with BlackRock by investing in Sterling LEAF, and that we are able to assist Nest in positioning itself as a true sustainability leader in the industry.  This partnership is a great example of what LEAF can provide for our clients – a simple, sustainability-focused, cash solution that maintains capital preservation, liquidity and yield objectives.”