Aegon UK has partnered with HSBC Global Asset Management as part of a new initiative to embed ESG criteria across its in-house workplace default range for ARC schemes.
The tie-up leverages HSBC Global Asset Management's considerable experience in both responsible and passive investing and is a key step in Aegon UK's plans to fully embed ESG criteria across its default fund range, the company said this morning.
From January, key ARC workplace default funds will start to invest in the newly launched HSBC Developed World Sustainable Equity Index fund, reaching a total of around 30% of assets for members in the growth stage within six months.
Aegon UK is the first investor in the fund, which is a low-cost solution designed to track the performance of the FTSE Developed ESG Low Carbon Select Index before charges. Those nearing retirement and invested in the Aegon Workplace Default Retirement fund will have 15% invested in the ESG component on completion of the process, which will see around £1.7bn invested in the new fund.
The new HSBC fund targets three areas of improvement with the investments it makes - a 20% uplift in ESG score as well as a 50% carbon emissions and fossil fuel reserves intensity reduction, relative to the parent index It aims to deliver on these targets without adding risk to the portfolio by keeping tracking error low.
The fund excludes companies that operate in specific sectors (e.g. controversial weapons and tobacco production) or those that generate significant levels of revenue from activities such as thermal coal, gambling and adult entertainment. It also incorporates a custom exclusion list based on company performance against the 10 principles of the UN Global Compact.
This change builds on last year's addition of ESG to its LifePath default funds for Master Trust and TargetPlan customers and now means that both Aegon's workplace propositions include a significant ESG allocation in their respective default funds.
Tim Orton, managing director for Investment Solutions at Aegon said: "We've become increasingly aware of our customers' desire to invest not just for their own future prosperity, but to also make an impact with it, and this is something that we also feel passionate about. HSBC Global Asset Management has strong credentials in sustainable investing, which was a key consideration for us when embarking on such an ambitious programme of change across our default range."
Stuart White, UK and International CEO at HSBC Global Asset Management said: "The transition to a lower-carbon economy is underway and our priority is to develop solutions that will enable our clients to participate in this transition. Our partnership with Aegon UK is an important milestone in achieving this goal and testament to our expertise in responsible investing."
"As the latest addition to our sustainable fund range, the HSBC Developed World Sustainable Equity Index Fund is ambitious in its approach as it focuses on not just one but three areas of improvement, allowing for the underweighting of less desirable stocks without excluding them entirely. This aligns with our approach of supporting companies as they transition to become more sustainable."
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