ESG Club
Joanna Sharples is chief investment officer at Aon DC Solutions
INNOVATING FOR CLIMATE CHANGE PROTECTION AND IMPACT
Investors, including pension scheme members, want to protect their invest- ments from the effects of climate change and make a positive contribution to society, supporting the transition to a low carbon economy in a sustainable way. Our objective is to help manage climate- related risks for our members and to do so in a fair and just way. Specifically, we want to reduce carbon emissions and to keep doing so in the future. Equally, we want to achieve these carbon reductions in a sustainable way, in line with a just transition.
When we started thinking about how we achieve this for the thousands of mem- bers invested in Aon’s range of DC solu- tions, including The Aon MasterTrust and Aon’s Group Personal Pension Plan, we felt that existing strategies in the market didn’t meet our objectives. While many funds achieve the desired carbon emis- sions reduction, the connection with the Sustainable Development Goals was not yet widely explored. We wanted to introduce a global equity strategy that combines a strong climate focus and positive contribution to society within our two default strategies. Addi-
tionally, we were seeking a strategy that would allow us to achieve our net zero commitment on our default funds. Reflecting this, having a fund that evolves and decarbonises over time was a must-have. We explored possible interest with UBS, and other major index houses, regarding potential collaborations on product devel- opment. UBS was quickly identified as a high-quality partner in the product devel- opment process. As leaders in rules-based customisation and sustainable investing UBS was ideally placed to help us. This culminated in the co-development and recent launch of the innovative UBS Global Equity Climate Transition Fund (the fund), which brings together UBS’ Climate Aware Framework and global stewardship programme. The fund pro- vides cost-efficient and broad-based expo- sure to global equity markets, and tilts towards companies that are better placed for the transition to a low carbon economy and have higher sustainability character- istics than the benchmark.
The aim is to shape the portfolio towards a net zero trajectory in line with the Paris Agreement. The fund also tilts towards companies with revenues aligned with selected UN Sustainable Development Goals relating to health, clean energy, decent work, responsible consumption and production, and climate action. This provides us with the ability to mitigate cli- mate-related investment risks for our members while aiming to make a positive contribution to society. Commenting on the fund, Ian Ashment, head of portfolio engineering and trading, says: “UBS’ portfolio engineering and trading, and sustainable and impact investing teams collaborated on the design of the fund. We want to provide
PI Partnership – Aon
The Aon MasterTrust and Aon’s Group Personal Pen- sion Plan seeded the fund with more than £700m in February. This replaces a large proportion of the passive equity exposure within our default funds, as it offers broad-based exposure to global equities but with better client metrics, lower carbon emissions, improved ESG scores and is focused on making a positive contri- bution to society.
investors with efficient exposure to a global equity index, but with risk-con- trolled tilts in favour of companies that have a lower current and future carbon footprint; decarbonise in line with the IPCC’s 1.5°C warming limit; and are aligned with five UN Sustainable Devel- opment Goals relating to health; clean energy; decent work; responsible con- sumption and production and climate action. The fund is able to leverage UBS’ firmwide engagement efforts.” Now we have introduced the fund within our default funds, members of Aon’s DC scheme solutions can protect their invest- ments from the effects of climate change and make a positive contribution to society, as well as supporting the transi- tion to a low carbon economy in a sustain- able way.
Copyright © 2022. Aon Solutions UK Limited. All rights reserved. Aon Solutions UK Limited Registered in England and Wales No. 4396810 Registered office: The Aon Centre, 122 Leadenhall Street, London, EC3V 4AN. Aon Solutions UK Limited is authorised and regulated by the Financial Conduct Authority. Aon Solutions UK Limited’s Delegated Consulting Services (DCS) in the UK are managed by Aon Investments Limited, a wholly owned subsidiary, which is authorised and regulated by the Financial Conduct Authority.
28 | portfolio institutional | May 2022 | issue 113
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