Aegon UK, the Edinburgh-based arm of Dutch financial giant Aegon, has announced that it will “transition” £3 billion ($3.8 billion; €3.57 billion) from its workplace default funds range to six UK-domiciled ESG index mutual funds it has developed with BlackRock.
The new iShares ESG Enhanced Equity Index fund range – along with BlackRock’s iShares ESG Sterling Corporate Bond Index Fund – will become the underlying funds for the Aegon Workplace Default fund and “a number of other Aegon default fund options”.
A spokesperson for Aegon UK told RI that its funds are “transitioning from the equivalent iShares UK-domiciled equity index fund range into these new ESG counterparts”.
The move will double the Aegon Workplace Default fund’s “ESG exposure from 30 percent to 60 percent for growth-stage investors”, Aegon UK stated.
By summer 2022, the firm said it would have invested an estimated £15 billion in ESG strategies across its default fund range over the last three years.
Last year, Aegon UK announced plans to invest £1.7 billion from its workplace default funds range in a new low-carbon developed-market equities fund created by HSBC Global Asset Management.
BlackRock’s six new funds, designed to support Aegon UK’s 2050 net-zero ambitions, track the recently launched Morningstar ESG Enhanced indices.
Targeting a 30% reduction in carbon emissions intensity, the indices also apply a set of exclusionary screens “to limit exposure to controversial companies”. Securities in the indices are then reweighted to favour those with “stronger ESG attributes”.
Ten exclusionary screens are utilised by the funds to limit exposure to controversial activities. They include exclusions around alcohol, gambling, adult entertainment, nuclear weapons, civilian firearms, tobacco, thermal coal, oil sands and companies that are not compliant with the UN Global Compact principles. Companies with a “severe” controversy score, as defined by Sustainalytics, the ESG data-provider owned by Morningstar, are also excluded.
“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,” said Tim Orton, Aegon’s managing director for investment solutions.
He added: “Around 90 percent 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.”