Phoenix Group is to launch a defined contribution default solution incorporating environmental, social and governance standards.
Phoenix Group’s new Standard Life Sustainable multi asset fund, which will officially open mid-December, will be a passive default fund using ESG components for key asset classes.
The fund will adopt three responsible investment approaches — screening, tilting and stewardship — in order to achieve its goal of minimising financially material risks and improving sustainability outcomes across the portfolio.
It will be available to Phoenix clients using the Standard Life Flexible Retirement Plan, a contract-based pension, and the group aims to make it available to master trust clients in future.
ESG components will make up 64 per cent of the asset allocation when it launches, with the aim being to boost that figure to more than 90 per cent during the second quarter of 2021.
The move comes amid increased focus on ESG funds by the industry, politicians and regulators.
Trustees are now required to produce an implementation statement explaining how they put their policies on ESG and stewardship, as listed in their statements of investment principles, into practice.
While an amendment to the pension schemes bill that aimed to set in law a duty on the part of pension schemes to align their investments with Paris climate targets was defeated last month, schemes of all sizes are taking it upon themselves to pursue the ESG agenda on their own.
A recent report into master trusts by the Defined Contribution Investment Forum, for example, found that eight of the 18 master trust providers surveyed incorporate ESG strategies for more than 50 per cent of their default funds in the accumulation phase.
And some providers, like Nest, have adopted the Paris agreement’s net-zero targets without waiting for a regulatory or legislative push.
Commenting on Phoenix Group’s move, Gareth Trainor, head of investment solutions at the group, said: “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.”
Benjamin Mercer is a reporter at FTAdviser's sister publication Pensions Expert