Three managers to look after Scottish Widows’s £1.4bn climate funds

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Scottish Widows has launched four environmental and climate-related investment funds with Schroders, BlackRock and Abrdn managing the assets worth £1.4bn. 

The Global Environmental Solutions Fund, developed with Schroders, focusses on directing pension investment into companies that provide solutions to critical environmental issues, such as global greenhouse gas emissions, food security, pollution and biodiversity loss.  

The new fund targets companies involved in advancing alternative energy generation and supply, clean mobility, transport and infrastructure sustainability, forestry, sustainable agriculture, biodiversity preservation and pollution prevention. 

The fund invests in companies that derive at least 50% of their revenues from goods and services that facilitate sustainable alternatives in transportation, electricity and heat production, water use, agriculture or industrial manufacturing.  
Companies that direct at least 20% of capital expenditure to the adaptation of their businesses or products and services to the circular economy are also eligible. As are companies that, in Schroders’ opinion, “exert significant influence through their policies and practices over their supply chains or customers to reduce emissions”.  

In addition, Schroders will look to eliminate exposure to commodity-driven deforestation in the companies held in the fund by 2025 as part of their overall Plan for Nature commitment.  

Scottish Widows recently published a report on nature-positive investment, backed by environmentalist Dr Tony Juniper CBE. 

Maria Nazarova-Doyle, head of responsible investments and stewardship at Scottish Widows, said:  “We recently called for the industry and government to tackle environmental crisis and nature degradation together through joined up, focussed action. With the launch of our new fund, we’re taking steps ourselves towards driving major investment into better outcomes for the environment as well as our customers.” 

Three funds track decarbonising benchmarks

The insurer has also launched three regional equities funds which track decarbonising benchmarks, favouring companies that lower carbon emissions and are involved in environmentally-friendly activity.

Managed by BlackRock and Abrdn, these funds are:

• Scottish Widows Emerging Markets Paris-aligned Index Equity Tracker Fund, which tracks the FTSE Emerging Markets Paris-aligned Index as a benchmark 

• Scottish Widows Developed World Paris-aligned Index Equity Tracker Fund, which tracks the FTSE Developed World Paris-aligned Index as a benchmark 

• Scottish Widows UK Climate Transition Index Equity Tracker Fund, which tracks the FTSE All Share Climate Transition Index as a benchmark 

Scottish Widows said the funds help halve the carbon footprint of all its investments by 2030 on its path to net zero emissions by 2050.

“The funds are aligned with the decarbonisation objectives of the 2015 Paris Agreement and will be used as building block components for over 80 Scottish Widows multi-asset funds,” said the insurer. 

Two of the funds track Paris-aligned indices, which facilitate an immediate 50% reduction in carbon intensity, followed by an ongoing 7% reduction year-on-year. The UK fund tracks a Climate Transition index, which also facilitates a 7% a year ongoing decrease, from an initial 30% reduction.   

The insurer will also report on progress against its climate targets in its second Task Force on Climate-Related Financial Disclosures report, due to be published in the coming months.

Which climate-related issues should insurers address most urgently in their investments?

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