Pensions provider Aviva has launched a defined contribution default fund which incorporates ethical, environmental, social and governance considerations.
The Stewardship lifestyle strategy will be available to existing and new clients of Aviva and can also be offered as an alternative to the existing default fund to employees.
The default arrangement – consisting of three active funds of Aviva’s stewardship offer – will have an annual management charge below the 0.75 per cent charge cap.
Aviva’s default fund launch – which has ethical and ESG considerations throughout the growth and consolidation phases – coincides with new rules introduced by the Department for Work and Pensions in this area.
Pension schemes with more than 100 members will be forced to disclose the risks of their investments, including the ones arising from ESG, later this year.
The new legislation mandates that trustees must make the statement of investment principles – a scheme’s investment strategy - available free of charge on a website from October 2019.
From October 2020, trustees must produce an implementation report which explains how they followed and acted on the investment policies outlined in the statement of investment principles.
Steve Waygood, chief responsible investment officer at Aviva Investors, which manages the funds, told FTAdviser that there has been "some really poor understanding on how to embed ESG issues in an investment process".
He added: "We were hugely pleased with the DWP clarification that ESG should matter to trustees, that they should set out their policies and approaches in this space, and that they should set out how they take into consideration the values of their clients.
"We were involved in the consultation, and we were advocating for this over the last 10 years."
Matt McGill, head of workplace propositions at Aviva, explained clients and members wanted to see ESG products.
He said the provider already has the first client "lined up to go live with this solution".
Aviva Investors, which has been managing the funds for its institutional clients since April 2018, has a three-layer investment approach.
The asset manager will exclude investments in companies with a significant involvement in tobacco, pornography or coal mining, for example.
Aviva Investors also engages with its holdings, working with companies to improve how they conduct their business.
Finally, it measures the ESG performance of the companies in which the funds are invested.
maria.espadinha@ft.com
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