ESG integration boost for Blackrock’s DC strategy

US INVESTMENT company BlackRock’s UK Defined Contribution (DC) default strategy, LifePath, is moving to the next phase of ESG integration.

The move will increase LifePath UK’s ESG exposure, with more than half of total LifePath UK assets (53 percent or £3bn) to be invested in ESG strategies by mid-2021.

BlackRock’s LifePath UK strategy, pioneered in 1997, is a series of target date funds (TDFs), designed specifically for UK DC pension scheme savers. LifePath provides members with broad and diversified access to 12 asset classes invested through low-cost, transparent index funds tailored for members based on their age.

LifePath already uses an ESG integration policy, ensuring a continuous review of the investment strategy and consideration of underlying investments. Last July, LifePath UK funds incorporated the BlackRock ACS World ESG Equity Tracker Fund.

The increase in ESG exposures will come from developed market equities, where LifePath will be investing in two ESG index funds. Exposure will significantly increase in the ACS World ESG Equity Tracker Fund, and a new exposure to the MSCI World ESG-screened developed market index will be added. The team is also reviewing other asset classes as part of future ESG-integration plans.

Sarah Melvin, head of UK at BlackRock, said the changes reflect the firm’s commitment to delivering sustainable long-term returns on behalf of pension savers. “They set money aside and invest for their financial future,” she said. “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 the principal default of the Aegon Master Trust. Tim Orton, managing director for Investment Solutions at Aegon UK, said over 200,000 members of Aegon’s workplace schemes would 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,” he said. “We are committed to satisfying their increasing interest in responsible investing.”

LifePath is designed to grow savings over an individual’s working life. It aims to take an age-appropriate risk for UK savers who are increasingly reliant on their DC pension for retirement income. The LifePath team adjusts portfolios by focusing on growth early in the savings journey and, through diversification, manages risk as retirement approaches.

The strategy aims to reduce UK equity exposures while increasing exposure to developed markets, as investors shift to direct investments in global equity vehicles.

LifePath is making a small increase to emerging market equities within its strategy.



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