Aegon to increase ESG exposure in Workplace Default fund through £3bn investment

Aegon UK has announced a £3bn investment into BlackRock’s ESG index fund range to increase the ESG exposure in its Workplace Default fund and several of its other default fund options.

On completion in the summer of 2022, Aegon UK will have transitioned approximately £15bn into ESG strategies across its default funds over the past three years.

This new fund range aims to meet the needs of clients, advisers and pension scheme members for core replacements of standard building blocks that maximise a fund’s ESG credentials, reducing carbon emissions intensity while remaining close to the parent benchmark.

Aegon reported that the new indices target a 30 per cent reduction in carbon emissions intensity and apply a set of exclusionary screens to limit exposure to controversial companies.

The securities are then reweighted to favour those with stronger ESG attributes, with the methodology aiming to maintain risk characteristics in line with standard market benchmarks and manage emerging ESG tail risks.

Aegon suggested that using the funds as well as an existing BlackRock ESG fixed income fund, ESG exposure in the Aegon Workplace Default fund will double for investors still in the growth stage of their retirement journey, from 30 per cent to 60 per cent, and increase to 40 per cent for those in retirement.

Aegon managing director for investment solutions, Tim Orton, commented: “We are excited to have worked with BlackRock on this new range of index-based funds and I’m proud that Aegon UK is setting the standard when it comes to sustainable index investing in a workplace default fund.”

“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. The progress we have made in this area also demonstrates our commitment to manage the risks associated with climate change.

“Around 90 per cent 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.”

BlackRock head of UK, Sarah Melvin added: “We are delighted to be working with Aegon UK to create the investment solutions needed to help fulfil their net-zero ambitions and investment principles. BlackRock’s purpose to help more and more people experience financial wellbeing is strongly aligned to that of Aegon UK.

“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.”

The move is the latest step in Aegon UK’s commitment to achieve a carbon net-zero position for its default funds by 2050, with carbon emissions aiming to be halved between 2019 and 2030.

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