Schroders has announced the launch of its Sustainable Multi-Factor Equity (SMFE) fund that aims to provide a solution to DC members’ growing demand for sustainable investment.
SMFE is a fund that looks to integrate environmental, social and governance (ESG) factors into an investment approach that aims to outperform the MSCI All Country World Index (ACWI).
The fund’s objective is to “maximise returns in a risk controlled, cost effective way”, with a target return of 1 per cent per annum over MSCI ACWI before fees, although there is no guarantee it will meet these objectives.
Schroders head of UK institutional DC, Tim Horne said: “DC pensions are increasingly looking at how best to incorporate sustainability into their schemes in response to investor demand and regulatory change. However, until now, this has been a challenge for DC schemes as the charge cap means many actively-managed strategies are out of reach for most schemes.”
Furthermore, it aims to cut the carbon intensity of the index by around 50 per cent in comparison to MSCI ACWI and provide DC trustees with a “comprehensive ESG solution that doesn’t involve onerous governance or monitoring requirements”.
Schroders created the SMFE fund following its Global Investor Study 2018, which found that 76 per cent of investors surveyed said that sustainable investment had become more important to them over the past five years.
Schroders global head of stewardship, Jessica Ground commented: “We’ve done that study for three years and it [how important sustainable investment is to investors] has been consistently increasing. It’s definitely led by millennials but it is increasing over all age cohorts. We don’t think that is a trend to be ignored.”
Additionally, 25 per cent of those surveyed felt that they are prevented from investing in sustainable investments due to concerns that they wouldn’t deliver as good a return as non-sustainable investments.