Standard Life is to start switching its existing workplace default funds into more sustainable investment strategies.
This process, which will phased in over 2022, will see changes made to the pension funds for more than 1.5m customers in 9,000 workplace schemes. These customers are primarily invested in the company’s largest default funds which are worth around £15bn. These include Active Plus, Passive Plus and the default fund on Standard Life’s Master Trust scheme.
Standard Life said it will look to embed newly evolved sustainable strategies, which will see around 80 per cent of these funds invested in ESG growth assets.
These will largely be passive investments that will seek to filter out certain sectors — such as tobacco manufacturers, controversial weapons, and those involved in thermal coal and unconventional oil and gas.
These funds will also deploy positive tilts, which be particularly focused on climate issues, reducing the overall carbon emissions of the portfolio while actively seeking to increase revenues from clean technology. The company will also focus on stewardship activity across the entire portfolio.
As part of this process Standard Life said it is targeting enhanced long-term growth, by taking appropriate levels of risk earlier and optimising glidepaths to manage that risk. It says it is also aiming to be more competitively priced with the switch to more passive investment strategies.
Master trust savers will be the first to switch over, with Standard Life commencing this process in February 2022 for those on core risk levels. This will involve around £1bn in assets and 100,000 customers.
Standard Life will then start to make the bulk of its customers from the second quarter of 2022. These are customers at risk level 3 in its Active Plus and Passive Plus defaults. This will cover 1.2m customers and account for around £12.2bn of assets.
The remaining customers on different risk levels will be moved in the second half of 2022.
By the end of 2022 around £15bn will be invested in the new sustainable strategies. Standard Life says this will help both employers and trustees meet their member and regulatory needs as well as ensuring pension members achieve good outcomes with robust, growth-focused sustainable solutions.
Standard Life launched the Sustainable Multi Asset Universal Strategic Lifestyle Profile fund at the end of 2020, although this was initially for new clients. This latest development will see existing clients also benefits from this newer strategy.
Gareth Trainor, head of investment solutions, Standard Life says: “The enhancements we are making will look to achieve growth earlier in the investment process, with the balance of a suitable glidepath for pension scheme members to help them aim for the best possible outcome when they come to retire. Our investment thinking and philosophy is continually evolving to reflect prevailing market and societal factors. We are focused on taking a financial approach to sustainable investing, which means taking the right amount of investment risk at the right times for all our pension scheme members.
“We are delighted that we’re set to embed our enhanced growth, sustainable focused solutions for our pension scheme members in 2022, beginning in February for Master Trust members.”