BlackRock's LifePath target-date funds will invest about £3.1 billion ($4.1 billion) in environmental, social and governance strategies by mid-2021.
The £5.9 billion investment option, which is used as a default by some U.K. multiemployer defined contribution plans known as master trusts, will extend ESG exposure to more than half of its assets, up from 14% that has been invested the BlackRock ACS World ESG Equity Tracker Fund, a developed market equity fund.
BlackRock will increase LifePath's exposure to the fund until a maximum permitted allocation of the fund is reached at 35%, the spokeswoman said. LifePath assets will then be invested in a new fund tracking the MSCI World ESG Screened index until optimal exposure is reached.
BlackRock also intends to expand ESG integration into other asset classes. Corporate bonds are next to be reviewed, and the firm plans to re-assess real estate investment trusts emerging markets and global small-cap equity allocations in future research, a spokeswoman said.
"The changes we are making to the LifePath strategy reflect our commitment to deliver sustainable long-term returns on behalf of pension savers, as they set money aside and invest for their financial future. As pension scheme trustees increasingly look for ways to further incorporate ESG investments into their schemes, this strategy enables them to balance the risk and return of their portfolios, while fulfilling their regulatory obligations," Sarah Melvin, head of U.K. at BlackRock, said in a news release.
LifePath is the principal default option of the £1.6 billion Aegon Master Trust. "As our master trust default fund, LifePath is a critical solution for current and future Aegon scheme members and we are committed to satisfying their increasing interest in responsible investing. I'm delighted that this change addresses this growing customer need," Tim Orton, managing director for investment solutions at Aegon U.K., said in the release.