BlackRock to pump £3bn into ESG strategies as part of UK pension offering

BlackRock has said that it will invest £3bn of its UK default defined contribution fund LifePath in “ESG strategies” over coming months.

The move, which applies to half the assets in LifePath, will be completed by the middle of 2021, BlackRock said in a statement. 

In the UK, LifePath is the main default fund of the Aegon Master Trust, after BlackRock’s UK DC platform and administration business was transferred to Aegon in 2018.

Tim Orton, Managing Director for Investment Solutions at Aegon UK said the announcement means that more than 200,000 members of Aegon’s workplace schemes will have increased exposure to ESG investments. 

LifePath is BlackRock’s range of target-date funds, launched more than 25 years ago. 

“The increase in ESG exposures will come from developed market equities, where LifePath will be investing in two ESG index funds,” BlackRock said. “Exposure will significantly increase in the BlackRock ACS World ESG Equity Tracker Fund and a new exposure to the MSCI World ESG screened developed market index will be added.” 

Sarah Melvin, Head of UK at BlackRock, said that “trustees increasingly look for ways to further incorporate ESG investments into their schemes”. 

The UK’s Department for Work & Pensions (DWP) has recently proposed to change pensions laws requiring pension scheme trustees to meet climate governance provisions in line with recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). DWP has also suggested strengthening penalty regimes if trustees fail to meet certain TCFD-related requirements. 

In the US, where BlackRock derives much of its business, 401(k) pension schemes are also increasingly demanding ESG solutions – despite the Department of Labour’s recent moves to limit ESG as a default option in such schemes, contested by many investors including BlackRock.