LifeSight master trust will invest almost $1bn (£734m) into a new climate transition index fund, which aims to rate individual companies on their ability to shift towards a low carbon economy.
This fund is based on the STOXX Willis Towers Watson Climate Transition Index, created by Lifesight’s parent company WTW. The CTI fund received approval at the end of October.
The announcement is being made on ‘finance day’ at the COP26 Climate Summit in Glasgow, where WTW chief executive John Haley is due to speak.
Haley says: “This fund “embodies the new climate-smart economic and finance for the structure changes we need in mainstream markets.”
He says this index looks beyond carbon emissions to provide a more sophisticated way of managing climate risk, using its Climate Transition Value at Risk (CTVaR) methodology to analyse the impact that moving to a low carbon economy will have on projected company cash flow.
Haley says the index is making forward-looking bottom-up evaluations of transition risk and opportunity for each company. The CTI fund is a UCITS vehicle that has been launched through the asset management exchange, an affiliate of Willis Towers Watson.
LifeSight’s investment will take place in several stages by the end of this year. It will be joined by approximately $75m of investment from other Willis Towers Watson clients, amounting to a total of approximately $1bn investment from defined contribution and defined benefit sources by the end of 2021.
LifeSight managing director Fiona Matthews says: “LifeSight’s investment in the CTI fund is the next stage in our journey to reaching net zero emissions across our default investment portfolios. LifeSight has been at the forefront of sustainable investing since its inception and we understand that an orderly transition to a net zero economy is an urgent global priority.
“We believe that achieving the goals of the Paris agreement are clearly in the direct financial interests of our members, so our investment in the CTI fund enables our members to benefit from the additional value created by organisations that are best placed to benefit from the transition to a low carbon economy.”
Craig Baker, Global Chief Investment Officer, Willis Towers Watson, adds: “The fund provides a robust framework for quantifying and incorporating the financial impact of climate risk and is designed to provide investors with greater exposure to those organisations that are most likely to benefit from the climate transition and reduced exposure to those that are ill prepared.”
LifeSight was the first master trust to embed ESG into its default investment strategies. In July this year, it committed to targeting net zero greenhouse gas emissions across all of its default funds by 2050, with a 50 per cent reduction by 2030, in line with the Paris agreement,
Its commitment to net zero covers all its defaults, which represent the vast majority of its total assets under management, currently over £11bn.