The National Employment Savings Trust (NEST) is addressing climate change on behalf of its four million members by investing 10% of its default fund in a climate aware fund run by UBS Asset Management.
NEST is the seed investor in the new UBS Life Climate Aware World fund, a rules-based fund which has been developed by UBS AM in partnership with NEST’s in-house investment team.
The fund will form part of NEST’s default fund – NEST Retirement Date Funds – designed to meet the needs of the government-backed master trust’s membership.
NEST, which has £1.5bn in assets under management, will seed the fund with £130.3m taken from its existing UBS Life World Equity fund. This represents about 20% of its developed equities portfolio and 10% of its total investment in the default.
The Life Climate Aware World fund targets returns in line with the FTSE Developed index. It applies a positive tilt towards companies identified as vital to combating climate change and a negative tilt to heavy carbon emitters and those with fossil fuel reserves or not acting to reduce emissions.
More specifically, the fund targets at least 40% higher exposure to companies that generate renewable energy and supporting technology compared to the FTSE Developed index, a 30% tilt towards companies most aligned to meet industry carbon reduction targets in line with the 2°C scenario and with a 50% reduction in carbon intensity.
According to NEST, the move sends a strong message to the companies it invests in that it expects to see measurable progress towards environmental sustainability.
Chief investment officer Mark Fawcett (pictured) said the fund “breaks new ground” and represents a vital step towards preparing NEST’s members’ portfolios for a lower carbon future.
He added: “Last year the world reached a major milestone in recognising the risks from climate change and agreeing to tackle them. The transition to a greener global economy will take place over the next 20 to 30 years and many of our members will be saving with us for at least that long. They are shareholders in that future.”
UBS Asset Management head of systematic and index investments Ian Ashment said the fund was developed to meet clients’ needs as they seek greater alignment between their investment policy and environmental, social and governance concerns.
In November last year, the HSBC Bank Pension Trust adopted Legal & General Investment Management’s (LGIM) Future World Fund for its £1.85bn defined contribution (DC) scheme default fund. The fund is a multi-factor global equities index fund that incorporates a climate ‘tilt’ to address the investment risks associated with climate change.
