NOW: Pensions, which manages £2.5bn (€2.9bn) of UK pension savings, is expanding its investments in sustainable bonds and sustainable equities to at least 50% of its portfolio net asset value by the end of 2021.
The revised approach will see members’ funds invested in an equity fund that invests in companies that have stronger sustainability characteristics and lower carbon footprints, it said.
These changes come as a result of the trustee’s ‘root and branch’ review of the trust’s investment strategy and ensuring that ESG issues are integrated into all of NOW: Pensions’ investments, it announced.
Joanne Segars, trustee chair at NOW: Pensions, said: “The changes announced to our investment strategy demonstrate our commitment to sustainability and responsible investment which targets having over 50% of the net assets value of the portfolio aligned to the trustee’s ESG principles by the end of 2021.”
She added that the trust has committed to reach net zero by 2050, with an interim target of 2030.
“We believe the focus on ESG supports better long-term financial outcomes for our members in later life,” she said.
Furthermore, the asset owner has increased its allocation to green and social bonds and has invested in a low carbon ESG equity portfolio.
This is consistent with NOW: Pensions’ commitment to invest in line with the Paris climate agreement to limit global warming to 1.5°C above pre-industrial levels.
NOW: Pensions is also exploring an additional innovative sustainability mandate with a greater focus on environmental and social solutions that will deliver the higher return objective, it said.
The enhanced focus on sustainability reflects the trustee view that “as long-term investors, incorporating ESG issues into a responsible investment process is integral to long-term success,” it noted.
Additional changes resulting from investment review
NOW: Pensions is also looking to increase the return objective for its Diversified Growth Fund to focus on improved member outcomes and is planning to extend the glidepath from 10 to 15 years during which time members approaching retirement will be switched to the Retirement Countdown Fund.
The move ensures that members approaching retirement are protected from major market movements, it said.
The investor continues to offer its members one default fund – an uninterrupted focus on a single investment solution, which ensures a strong approach to investment governance.