Scottish Widows unveils £1.4bn climate-aware funds

Scottish Widows announced the launch of a new Global Environmental Solutions Fund it said will be “focused on directing pension investment into companies that provide solutions to critical environmental issues, such as global greenhouse gas emissions, food security, pollution and biodiversity loss.”

As part of a suite of new strategies applying to £1.4 billion worth of assets, the new fund targets companies involved in “advancing alternative energy generation and supply, clean mobility, transport and infrastructure sustainability, forestry, sustainable agriculture, biodiversity preservation and pollution prevention.”

Developed with fund manager Schroders, the fund invests in companies “that derive at least 50% of their revenues from goods and services that facilitate sustainable alternatives in transportation, electricity and heat production, water use, agriculture, or industrial manufacturing.”

Companies that direct at least 20% of capital expenditure to the adaptation of their businesses or products and services to the circular economy are also eligible — as are companies that, in Schroders’ opinion, exert significant influence through their policies and practices over their supply chains or customers to reduce emissions.

Scottish Widows is targeting investment up to £25 billion in climate-aware strategies by 2025.

“The fund will aim to help tackle biodiversity loss through investment in, and engagement with, companies that provide products and solutions that address this issue, or do so through their own company policy,” said Scottish Widows.

“In addition, Schroders will look to eliminate exposure to commodity-driven deforestation in the companies held in the fund by 2025 as part of their overall Plan for Nature commitment.”

Maria Nazarova-Doyle, Head of Responsible Investments and Stewardship at Scottish Widows, said: “We recently called for the industry and government to tackle environmental crisis and nature degradation together through joined up, focussed action.

“With the launch of our new fund, we’re taking steps ourselves towards driving major investment into better outcomes for the environment as well as our customers.

“We have an urgent imperative to support the companies attempting to drive the change our planet desperately needs, while protecting the savings and livelihoods of our members in the long run.

“More innovative solutions are on the horizon, but we must work together to ensure they become a reality.”

Scottish Widows has also launched three regional equities funds which track decarbonising benchmarks.

These funds, managed for Scottish Widows by BlackRock and Abrdn, look to “invest in companies at the forefront of the transition to a low carbon economy, aiding Scottish Widows’ targets to halve the carbon footprint of all its investments by 2030 on its path to net zero emissions by 2050.”

The funds are aligned with the decarbonisation objectives of the 2015 Paris Agreement and will be used as building block components for over 80 Scottish Widows multi-asset funds.

Two of the funds track Paris-aligned indices which facilitate an immediate 50% reduction in carbon intensity, followed by an ongoing 7% reduction year-on-year.

The UK fund tracks a Climate Transition index which also facilitates a 7% a year ongoing decrease, from an initial 30% reduction.