Retirement, workplace savings and protection solutions provider Aegon UK announced today that it is partnering with HSBC Global Asset Management on a new initiative to embed ESG criteria across its in-house workplace default range for ARC schemes. The agreement will see Aegon UK invest around £1.7 billion in HSBC GAM’s newly launched HSBC Developed World Sustainable Equity Index fund.

The partnership marks a step by Aegon UK towards its recently announced sustainability commitments, including a 2050 net-zero emissions target for its auto-enrolment default pension funds, and a targeted 50% reduction in carbon emissions associated with default funds by 2030.

Tim Orton, Managing Director for Investment Solutions at Aegon said:

“We’ve become increasingly aware of our customers’ desire to invest not just for their own future prosperity, but to also make an impact with it, and this is something that we also feel passionate about. HSBC Global Asset Management has strong credentials in sustainable investing, which was a key consideration for us when embarking on such an ambitious programme of change across our default range. We are pleased to be partnering with HSBC Global Asset Management in this initiative as we continue to improve our range of sustainable and ethical solutions to meet our customers’ needs.”

The new HSBC Developed World Sustainable Equity Index fund aims to track the performance of the FTSE Developed ESG Low Carbon Select Index, while targeting a 20% uplift in ESG score, and 50% carbon emissions and fossil fuel reserves intensity reduction, relative to the parent index. The fund also applies exclusions for companies involved in controversial weapons or tobacco production, and those that generate significant levels of revenue from activities such as thermal coal, gambling and adult entertainment, in addition to a custom exclusion list based on company performance against the 10 principles of the UN Global Compact. Aegon UK is the first investor in the fund.

Aegon stated that key ARC workplace default funds will start to invest in the fund beginning in January, reaching a total of around 30% of assets for members in the growth stage within six months. Those nearing retirement and invested in the Aegon Workplace Default Retirement fund will have 15% invested in the ESG component on completion of the process.

Stuart White, UK and International CEO at HSBC Global Asset Management said:

“The transition to a lower-carbon economy is underway and our priority is to develop solutions that will enable our clients to participate in this transition. Our partnership with Aegon UK is an important milestone in achieving this goal and testament to our expertise in responsible investing.

“As the latest addition to our sustainable fund range, the HSBC Developed World Sustainable Equity Index Fund is ambitious in its approach as it focuses on not just one but three areas of improvement, allowing for the underweighting of less desirable stocks without excluding them entirely. This aligns with our approach of supporting companies as they transition to become more sustainable.”