Pension provider Aegon has invested £3bn into a new range of BlackRock ESG index funds.
The company worked with BlackRock to develop the range of six iShares ESG equity index funds which track the newly created Morningstar ESG Enhanced indices covering regional and country-specific exposures.
The range will become the underlying funds for the Aegon Workplace Default fund and aims to become the core replacement of standard building blocks by maintaining the risk characteristics with standard market benchmarks.
The indices will target a 30% reduction in carbon emissions intensity while screening out any exposure to controversial companies. The stocks are then reweighted to favour those with higher ESG scores.
Investors in Aegon’s growth fund pathway will see their ESG exposure double from 30% to 60% because of the investment. Those in retirement will see their ESG exposure rise from nothing to 40%.
Aegon said several other default fund options will use the BlackRock index funds while the risk appetite and performance expectations will remain unchanged.
It added the move is part of its target to make its default pension funds carbon net-zero by 2050 and halve its carbon emissions by 2030, in line with the Paris agreement. Following completion, the group will have transferred £15bn into ESG strategies across its default funds in the last three years.
Sarah Melvin, head of UK at BlackRock, said: “This new range will help pension savers incorporate sustainable considerations into their retirement portfolios as they look to secure their financial futures.
“We continue to work with clients to help them navigate the energy transition and offer them more choice when seeking to implement their sustainability goals.”
Tim Orton, managing director for investment solutions at Aegon, added: “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.
“Around 90% 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.”