Phoenix Group, the UK’s largest long-term savings and retirement business, announces the launch of a new ESG DC Default solution for pension fund clients of its Standard Life Assurance business, and their scheme members.
The new passive ESG Default will launch mid-December 2020 and will be a multi-asset, diversified solution with Environmental, Social and Governance (ESG) fund components for key asset classes. Its launch follows on from the expansion earlier this year of the range of self-select responsible investment funds available to workplace scheme members. This range now totals 12 funds and there are plans in place to expand it further.
Responsible investment is a core part of Phoenix Group’s overall sustainability strategy. Phoenix and its asset management partners have been taking fundamental ESG factors into consideration when making investment decisions for many years. This launch has been driven forward by the Group’s passion for responsible investment and a growing demand from workplace clients, their advisers, trustees and scheme members for an ESG Default solution. The launch also highlights Phoenix’s ongoing investment in what is important to its growing Workplace business operating under the Standard Life brand*.
The new Standard Life Sustainable Multi Asset ESG Default solution will aim to achieve good member outcomes in retirement, and will blend three responsible investment approaches - Screening, Tilting and Stewardship. It will focus on ESG factors that mitigate “financially material risks”, while seeking to improve sustainability outcomes at a portfolio level.
From 1 October 2019, Trustees have had a statutory obligation to specify their policies in relation to “financially material considerations” including those involving the ESG factors taken into account in the selection, retention and realisation of investments**.
Commenting, Gareth Trainor, Head of Investment Solutions, said:
“Responsible investment is a central consideration in all the workplace pension solutions we offer. But we’re delighted we will be launching our new more focused ESG default for DC pension clients and their members before the end of the year. The demands placed on scheme default solutions continue to evolve. While delivering good member outcomes, value and rigorous governance is vital, responsible investment considerations have also become important to scheme members, policymakers and regulators alike. Our new ESG Default solution meets this demand. It’s a flexible solution, ultimately designed to provide good member outcomes by thinking more holistically about risks and opportunities.
“We’ve listened to feedback from stakeholders across the industry and sought input from our ESG experts to develop this solution. Placing ESG factors in the context of being ‘a financially material consideration’ helps identify areas that could have a positive or negative impact on the business model of a company that you are investing in. In particular, ensuring that these ESG factors have a financial benefit will align with trustees’ fiduciary duty to act in the best interest of members. Straying beyond these factors could be considered to be moral or ethical decision-making on behalf of members, something that the trustees or employer would need to canvas member opinion on.”
Trainor continues:
“The challenge with any default fund is to meet the needs of a broader scheme membership in order to deliver a good retirement outcome while providing value and ensuring good governance. Given the wide range of views in the field of responsible investments, the important question for trustees and our industry is, will a default remain appropriate for the broad scheme membership, if it were to stray beyond these factors. This is an interesting area that our industry continues to debate. It’s also why we know it’s important to continue to expand our self-select range of responsible investment funds, to give those individual members who are looking for something specific when it comes to responsible investment the options.”
“Given their established approaches to responsible investing and stewardship, Aberdeen Standard Investments is our key partner for this new solution. We have worked closely with them in developing these funds to ensure that they meet the needs of our members. Aberdeen Standard Investments will be providing the majority of the components within this new Default.”
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Further information on the fund
The Standard Life Sustainable Multi Asset will be available to clients choosing Standard Life’s Group Flexible Retirement Plan (GFRP), a contract-based pension, and Trust Based Pension for own-trust workplace clients when it launches in December. The aim is to make it available to Master Trust clients in the future too.
Key features include:
Flexible - appropriate for members seeking to take an income (drawdown) or for those who have still to decide how they wish to take their retirement benefits. Recognised three-fund strategic lifestyle approach, appropriate for members seeking flexibility on how they take their retirement benefits.
Personalised glide-path – a 15-year glide-path aligned to a member’s selected retirement date which utilises three multi-asset funds, and supports the flexibility that members have in how they take their money. It de-risks automatically by switching members from their growth phase into a pre-retirement fund and ultimately an atretirement fund. ESG considerations are incorporated throughout the growth and consolidation phases.
Multi-asset solution - provides exposure to equities and bonds from around the world, as well as property via a global Real Estate Investment Trust (REIT).
Screens and tilts - it will set clearly defined sustainable outcomes, screening out companies with significant sustainability risks, while tilting investments to improve ESG scores relative to the parent index in areas such as reducing carbon intensity and enhancing green revenues. Exclusions will include thermal coal and unconventional gas, and UN Global compact violators. Tilting will include uplift in green technology solutions by 50% and reduction in carbon intensity by 50% compared to the parent indices.
Active stewardship - Phoenix Group requires the fund managers it works with to be active owners of the companies in which they invest, and to use their stewardship capabilities to work with the companies they are investing in, to drive change for the better.
Future-proofed – built to easily and quickly adapt to changes in member behaviour, markets or regulation in the future.
Oversight – longstanding, tried and tested investment governance to ensure funds operate in line with the expectations we set for customers. The governance process has two key components – looking at the fund managers which manage the funds and at the funds themselves. Additionally, prior to offering any responsible investment funds on our platform we expect the fund manager to be a signatory of the UN Principles for Responsible Investing.
Asset Allocation
At launch, ESG-componentry will make up 64% of the asset allocation. This allocation will increase to over 90% when further ESG componentry is launched during the second quarter of 2021.
ENDS
*Phoenix uses the “Standard Life” brand under license from its strategic partner Standard Life Aberdeen
** This was laid out by the Pension Regulator
Enquiries
Nicki Lundy
Head of Media Relations Communications
Phoenix Group
Mobile:07975717599
Nicki_lundy@standardlife.com
Leonie Garfield
Lansons
07530 626 212
leonieg@lansons.com