NEST, the UK’s workplace pension fund, has committed £200m (€236.9m) to BlackRock’s Institutional Cash Series (ICS) Sterling Liquid Environmentally Aware Fund (LEAF).
The amount will fluctuate depending on asset allocation and investment strategy, as that is the precise nature of the fund, to give liquidity, BlackRock said.
The move comes as NEST – one of the UK’s top five defined contribution (DC) pension schemes – is forecast to grow its assets under management to £20bn by 2022.
The investment follows NEST’s announcement in June 2019 that it would be banning tobacco from the entirety of its portfolios and, where possible, begin to transition assets into sustainable strategies.
The master trust said the decision to exclude tobacco holdings from its portfolios was based on the expected future performance of the tobacco industry.
Simultaneously, BlackRock was working to launch the LEAF series, which screens out tobacco and follows sustainability-focused investment criteria.
Additionally, BlackRock said the demand for sustainable cash is rapidly growing with interest from a diverse client set, including corporates, private banks, wealth managers, universities, charities and pension schemes.
The manager launched its LEAF series in July 2019 to meet growing demand for sustainable cash solutions in sterling, euro and US dollar.
They are the first range of money market funds of its kind, launched with the thematic purpose of tilting investments towards environmental factors, as well as social and governance considerations, while maintaining the core objectives of liquidity funds, BlackRock said.
Mark Fawcett, NEST’s chief investment officer, said: “Assessing ESG factors when investing sheds light on how adaptable a company or industry is and how sustainable it will be in the years to come.
“We believe it helps achieve stronger long-term, risk-adjusted returns,” he said, adding that “it is important that fund managers step up and show their commitment to responsible investment”.
Alex Cave, head of UK institutional DC at BlackRock, said that there has been an increasing number of DC clients focused on the impact of sustainability on their portfolios.
Last month BlackRock published an open letter to its clients highlighting that it planned to expand its sustainable product offering, in addition to making sustainability integral to portfolio construction and risk management.