Legal & General Investment Management (LGIM) has launched the Sustainable DC Property Fund in response to a growing demand from defined contribution (DC) schemes to access real assets and to incorporate more ambitious ESG targets.
The asset manager said the fund is reshaping an existing property portfolio to include responsible investing as a core target - with explicit ESG objectives, including net zero operational carbon in the direct property portfolio by 2030. It said the fund is already measuring carbon emissions and has set reduction objectives in line with science-based targets.
In addition to LGIM's wider efforts to advance the low-carbon transition, the fund has already taken actions to deliver measurable progress on ESG with a focus on explicitly reducing operational energy consumption. The fund has developed carbon reduction roadmaps at individual asset level and commissioned an estimate of social value created by the fund, as a baseline against which to measure future social impact. This is already influencing occupier engagement and producing tangible outcomes. Occupiers are also being screened based on ESG exclusion criteria.
Valued at £238m (as at 30 June 2021), the fund provides exposure to a diversified portfolio of assets across sectors and aims to achieve both income and long-term capital growth. In addition, the fund will target a 30% allocation to the L&G Global Real Estate Equity Index Fund to provide liquidity and support daily dealing for DC clients.
LGIM real assets director of fund management Michael Barrie said: "The demand for real assets is growing, three quarters of our recent major investment consultant conversations in DC distribution have emphasised demand for them.
"We believe that protecting and enhancing real assets against the effects of climate change will create long-term value and performance. We are adopting this positioning now to capture this performance and to help enhance the long-term financial value of real estate."
LGIM Real Assets director of strategy and ESG Rob Martin added: "The fund will provide a market-leading offering for clients that demand an increased focus on ESG. Providing a portfolio that positions towards the highest net-zero standards will benefit both occupier demand and investment performance, as well as reduce risk."
LGIM head of DC investments Veronica Humble agreed: "Our research shows that DC members care deeply about ensuring that their pensions are invested in a responsible manner. The Sustainable DC Property Fund has ambitious carbon reduction targets and provides diversification through access to an alternative asset class that combines income and long-term capital growth."
The launch of the fund today (4 October) comes after LGIM launched the L&G ESG Paris Aligned World Equity Index Fund last month, which combines broad exposure to developed market equities with Paris-aligned reductions in carbon emissions.