Background: optimising customer outcomes
In 2019, Royal London Asset Management and our parent group, Royal London, identified the opportunity to develop the equity elements in Royal London's core investment proposition, with the aim of improving customer outcomes.
The main beneficiaries of any development would be investors in the flagship Governed Range, including the workplace default investment, and the GMAP (Global Multi Asset Portfolios) range.
There was a growing expectation among workplace defined contribution (DC) clients that responsible investment considerations should be reflected in their investment options. This was creating competitive pressures. Meanwhile, evolving regulatory expectations and Royal London's ambition to advance its responsible investing capabilities also contributed to a desire to explore propositional enhancements.
There was a wish to provide customers with a solution that looked to harness Royal London Asset Management's long-established responsible investing expertise. Active strategies can express Environmental, Social and Governance (ESG) views through stock selection. But the Royal London Governed range and GMAP funds used passive equity funds, which did not formally integrate ESG factors. Any ESG integration needed to manage expected risk and returns while seeking to avoid excessive tracking error, all while ensuring value for money.
Through close collaboration between the Royal London investment proposition team and our quantitative and responsible investment (RI) teams, a solution began to take shape.
Meeting DC client needs
This partnership enabled us to draw on our active ESG expertise while designing a systematic, rules-based approach to suit the needs of Royal London's large-scale DC use.
Royal London wanted low-cost equity exposure that better reflected ESG considerations, while aiming to provide benchmark-like returns for customers. Analysis was carried out to understand the impact that different tracking error limits would have: this showed that a 1% tracking error limit presented the most appropriate level to help achieve a material improvement in ESG profile while continuing to deliver returns in line with benchmark. In our view, this boundary was critical in helping the funds remain within default strategies, where even modest deviations from benchmarks can have meaningful implications for member outcomes.
Then came the issue of potential exclusions. Rather than imposing rigid exclusions or aggressive decarbonisation pathways, the group opted to retain the flexibility necessary to retain focus on customer outcomes. This approach reflected a broader obligation to deliver responsible investment ambitions within the fiduciary duty to customers. The approach also aligns with our wider preference as an active manager for engagement with companies over exclusions. This is based on our belief that by working closely with companies on the issues that matter most to them and to clients, it is possible to support better corporate practices and aim to deliver stronger long-term returns.
Designing the Tilt funds
A key turning point was the expansion of our internal capabilities. This allowed the team to move beyond traditional passive investing and begin designing a practical, repeatable approach to ESG integration. This is when the concept of the Tilts funds came to life.
Rather than create a custom index, the approach focused on making numerous incremental improvements versus the benchmark index, the cumulative effects of which were expected to be material. This core design principle aimed to produce significant carbon intensity and governance improvements, rather than exclude companies or sectors. As well as managing broad market exposure, this approach retains voting rights and promotes engagement with companies.
At launch, two ESG inputs were prioritised. The first was a greenhouse gas emissions reduction tilt, designed to lower portfolio carbon intensity relative to the benchmark. Targets differed by region to reflect market structure, with lower initial reductions in the UK due to its higher concentration of carbon intensive companies.
The second was a governance-focused remuneration tilt, underweighting companies where we had persistently voted against executive pay practices. Importantly, the approach allows scope for nuance. The Tilt funds are not just driven purely by data; they also incorporate the RI team's established approach to governance research and proxy voting.
Over time, the framework evolved. While formal net zero commitments were not initially embedded within fund prospectuses, ongoing collaboration between Royal London Asset Management and our parent group led to updated policies reflecting a more explicit alignment with group level net zero ambitions. These changes took effect in December 2025.
The development of the governance tilts has been a continuous process and has been supported by our growing internal responsible investing infrastructure. The approach has been developed to align with our Good Governance Policy. Alongside remuneration, the RI team now assesses companies' board make-up, audit quality and the ways they interact with stakeholders, customers and communities. The funds then tilt away from the worst performers in each sector.
Important information
For Professional Clients only, not suitable for Retail Clients.
This is a financial promotion and is not investment advice. The views expressed are those of Royal London Asset Management at the date of publication unless otherwise indicated, which are subject to change, and is not investment advice.
The Funds are sub-funds of Royal London Equity Funds ICVC, an open-ended investment company with variable capital with segregated liability between sub-funds, incorporated in England and Wales under registered number IC000807. The Authorised Corporate Director (ACD) is Royal London Unit Trust Managers Limited, authorised and regulated by the Financial Conduct Authority, with firm reference number 144037.
For more information on the fund or the risks of investing, please refer to the Prospectus or Key Investor Information Document (KIID), available via the relevant Fund Information page on www.rlam.com.
