BlackRock DC default fund to invest £3bn in ESG strategies by mid-2021

BlackRock has announced plans to increase its investment in environmental, social and governance (ESG) strategies within its UK defined contribution (DC) default strategy, LifePath, by mid-2021.

The move is expected to “materially increase” the fund’s ESG exposure, with more than half (53 per cent) of LifePath's UK assets, around £3bn, expected to be invested in ESG strategies by this time.

The increase in ESG exposures will come from developed market equities, with exposure in the BlackRock ACS World ESG Equity Tracker Fund expected to “significantly increase”, alongside new exposure to the MSCI World ESG screened developed market index.

The fund currently uses an ESG integration policy to ensure a continuous review of the investment strategy and consideration of underlying investments to improve long-term outcomes through the management of exposure to ESG risks.

Alongside these increasing ESG exposures, the fund is also expected to increase exposure to developed markets, as investors shift to direct investments in global equity vehicles.

It is also making a small increase to emerging market equities, given the "strong long-term growth potential" of the asset class for younger investors.

The group confirmed that fees will remain the same amid these changes.

Commenting on the announcement, BlackRock head of UK, Sarah Melvin, said: “The changes we are making to the LifePath strategy reflect our commitment to deliver sustainable long-term returns on behalf of pension savers, as they set money aside and invest for their financial future.

“As pension scheme trustees increasingly look for ways to further incorporate ESG investments into their schemes, this strategy enables them to balance the risk and return of their portfolios, while fulfilling their regulatory obligations.”

LifePath is also the principal default for the Aegon Master Trust, with Aegon UK managing director for investment solutions, Tim Orton, highlighting the shift as addressing a growing customer need.

He stated: “I’m excited that these changes will mean over 200,000 members of Aegon’s workplace schemes through our TargetPlan proposition will benefit from increased ESG exposure and reduced carbon intensity in their investment.

"As our master trust default fund, LifePath is a critical solution for current and future Aegon scheme members and we are committed to satisfying their increasing interest in responsible investing.

"I’m delighted that this change addresses this growing customer need.”

The announcement also follows similar news from Scottish Widows, who announced plans to divest £440m under a new ESG policy.

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