LifeSight, Willis Towers Watson’s (WTW) UK defined contribution (DC) master trust, has outlined a new Environmental, Social & Governance (ESG) investment strategy, which will see it allocate around half of the Equity investments within the default fund to ESG issues by Q4 2018.
WTW said that this is the first master trust of its kind to make ESG a major part of the default fund, which is designed to improve outcomes for scheme members through increasing diversification and better risk-adjusted return scenarios.
The first part of LifeSight’s strategy will rely on the MSCI Adaptive Capped ESG Universal Index, which promotes investment in companies with strong ESG attributes and in markets with a highly diversified portfolio that more evenly spreads capital and risk.
Secondly, LifeSight will use the Robeco Global Sustainable Multi-Factor Equities Index to invest in equities in a systematic manner, allocating to individual stocks based on a number of factor attributes such as valuation, quality, momentum and low volatility.
“Fundamentally, this move has been made to improve outcomes for scheme members,” said David Bird, Head of Proposition Development for LifeSight. “It has been in our thinking for some time, and so we’ve been working to develop the most appropriate vehicles to take the strategy forward at the right time and deliver what we consider will be the most optimal outcomes. That is in terms of performance, risk management and value for members.
“The construction of these two vehicles has enabled us to confidently make this substantial change to the default fund’s asset allocation, and keep LifeSight’s investment approach ahead of the curve and still offering great value for members.”
Bird continued: “The DC investment world faces a range of challenges. Adding ESG’s risk profile to our investment mix supports the growing member and employer appetite for sustainable investment, whilst maintaining the returns they need for retirement.
“ESG factors have increasingly been on the investment agenda for DC trustees, so they need to be thinking about where it fits into their scheme’s glidepath, assessing member demand and developing the right strategies to deliver for them.”