Schroders has launched a new Sustainable Multi-Factor Equity Fund, designed to meet growing demand for more ESG-focused investment strategies.
This is a global fund, benchmarked against the MSCI All Country World Index. It is designed to appeal to DC schemes, who are looking to invest members’ pension savings more sustainably.
Schroders says it hopes to offer a cost-effective solution that integrates environmental, social and governance analysis into a systematic investment approach.
At its core is Schroders’ new proprietary framework, SustainEx, which measures the positive and negative ESG impacts companies place on society and the environment.
To further meet clients’ expectations of sustainable portfolios, the SMFE fund will have less than half the carbon intensity of the index, and exclude industries such as tobacco, weapons and gambling companies.
This launch comes after increased regulatory pressure for pension schemes to look more seriously at stewardship and sustainability issues. The Department of Work & Pensions has recently launched new rules, which will come into force in October 2019, which compel trustees to consider “financially material” ESG risks as part of the investment process.
The FCA is consulting on this issue next year in relation to contact-based pension schemes.
The new fund is based on Schroders Global Multi-Factor Equity Fund, launched last year.
Schroders head of UK institutional DC Tim Horne says: “DC pensions are increasingly looking at how best to incorporate sustainability into their schemes in response to investor demand and regulatory change.
“However, until now, this has been a challenge for DC schemes as the charge cap means many actively-managed strategies are out of reach for most schemes. Existing low-cost options also tend to offer a limited approach to sustainable investing.
“We are confident that Schroders’ SMFE fund, a cost effective, systematic multi-factor solution which integrates ESG through its bottom-up investment approach, will appeal to trustees wishing to add sustainability into the default investment strategy.”
