Scottish Widows has invested £2bn of its pension portfolios in BlackRock’s newly launched fund designed for the transition to a low carbon economy.

The pension provider helped design the Authorised Contractual Scheme (ACS) Climate Transition World Equity Fund and has become its first investor.

‘Climate Transition’ is a new data-driven investment approach developed by BlackRock that measures a firm’s exposure and management to transition risks and opportunities.

It seeks to provide investors with a “broad market approach” to invest in the transition to a low carbon economy.

BlackRock said that the strategy reflects investors’ increasing demand for solutions assessing climate-related risks and opportunities.

“The world is undergoing a rapid transition to a low-carbon economy,” said BlackRock vice chairman, Philipp Hildebrand.

“This transition — driven by climate change, technological innovation, consumer preference and regulatory and policy development — is going to create winners and losers, and investors need to be prepared.

“With an investment strategy developed to seek to identify global opportunities and risks at an early stage, the fund is designed to help investors benefit from this historic shift while also contributing to positive environmental outcomes.”

The fund’s investment approach has a framework that aims to translate low carbons risks and opportunities into five ‘pillars’: energy production, clean technology, energy management, water management and waste management.

BlackRock will score each company’s management of the pillars into a single assessment, relative to their peers.

The fund excludes controversial and nuclear weapons; civilian firearms producers and where revenues are >5 per cent; UN Global Compact breaches; exposure to tar sands and thermal coal where revenues are >5 per cent.

Commenting on the investment, Scottish Widows head of pension investments, Maria Nazarova-Doyle, said: “Offering customers more sustainable investment choices, and challenging companies in which we invest to behave more sustainably and responsibly, is a central part of our strategy.

“Our work with BlackRock to design this new fund, together with our significant investment, will help to engender positive change in the industry; incorporating environmental, social and governance risks into a portfolio can have a meaningful financial impact on performance.”

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