Over GBP5 billion of workplace default assets now moved into ESG strategies, says Aegon UK
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 GBP5 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 GBP3.5 billion, which will bring the total to over GBP8.5 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 per cent 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 per cent allocation for growth stage investors to the HSBC Developed World Sustainable Equity Index fund, which seeks to target a 20 per cent increase in ESG ratings, a 50 per cent reduction in carbon emissions intensity and 50 per cent 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 GBP3.5 billion to the GBP5 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 per cent agreed that climate change is an important risk to consider when investing for the future. Nearly half (45 per cent) 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 per cent³ 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.
Tim Orton, Managing Director for Investment Solutions, says: “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 GBP5 billion of our Pension scheme assets transitioned to lower carbon ESG strategies."
“GBP14 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.”