Legal & General Investment Management (LGIM) has launched a climate transition index fund for defined benefit and defined contribution investors.
The fund is based on FTSE Russell’s FTSE Global Equity Index Series, with constituents adjusted based on their fossil fuel reserves, carbon emissions and green revenues.
The fund also takes into account Transition Pathway Initiative analysis of how the world’s largest and most carbon intensive public companies are managing the climate transition. It excludes fossil fuels, tobacco, controversial weapons and UN Global Compact violators.
LGIM said the aim of the index fund is “to provide sophisticated and diversified exposure to companies that are more aligned to the Paris Agreement and the benefits of the climate transition, while going beyond a narrow focus on carbon emissions and fossil fuel”.
The fund has received an initial investment from the UK pension schemes of multinational IT company Atos, and will be offered as an investment option on PensionBee, an online pension consolidation platform.
“This represents an important step in our ambition to move towards a net-zero target by 2035, which is fully aligned with the sponsor’s own net-zero ambition,” said Tegs Harding, trustee of the Atos UK Pension Schemes.
“Moving the schemes equities to this fund results in a material reduction in the carbon impact of the schemes holdings on day one but importantly also has a focus on engagement activity which will continue to drive improvements in the way in which companies operate in the future.”
LGIM is a founding member of the Net Zero Asset Managers Initiative, which was publicised last week and commits signatories to work with asset owner clients on decarbonisation goals.
Earlier this year LGIM announced it had completed the development of a proprietary energy transition model. In connection with that it is launching a climate solution capability for institutional investors to measure the climate alignment of assets, and to design and implement “Pathways to Paris” solutions.