Legal & General Investment Management (LGIM) has unveiled the Legal & General Future World ESG Developed Fossil Fuel Exclusions Index Fund.
The venture, in collaboration with Europe’s largest conservation charity, The National Trust, is designed to support investors, charities and institutions in fulfilling their fossil fuel divestment commitments.
Launching with initial seed funding, the fund offers an avenue for UK investors, including endowments, charities, platforms and wealth managers.
This move is in response to the increasing demand for fossil fuel divestment solutions, explained LGIM. Notably, over 1,500 global institutions made public commitments to divest from fossil fuels in 2021.
The fossil fuel divestment strategy aims to deliver an efficient and cost-effective way for investors to minimise their exposure to high carbon-emitting companies and those with vast carbon reserves, said LGIM.
Moreover, the fund gives investors access to UK and global equities and incorporates ESG tilts to LGIM-designed indices. With a tilt mechanism, the fund reduces exposure to firms with unfavourable ESG practices and increases the focus on those with commendable ESG standings, added LGIM.
As part of its criteria, LGIM’s indices demand companies to adhere to specific global benchmarks for inclusion. Notably, the fund will omit companies with a carbon reserve intensity over 0%, encompassing energy, mining and utilities sectors.
Furthermore, the fund integrates LGIM’s Climate Impact Pledge, aiming to hasten the pace companies tackle climate change and transition towards a low-carbon economy.
Mark Johnson, head of institutional clients at LGIM, commented: “We are seeing demand from charities and universities to divest from fossil fuels as they respond to expectations from increasingly sustainability-conscious donors and students.”
Dabinder Hutchinson, director of finance at the National Trust, added: “We are delighted that we have been able to collaborate with LGIM to co-create this new strategy with our required fossil fuel exclusions and LGIM’s wider engagement programme with companies to enable the development of more climate-friendly investment portfolios to support the climate transition and our race against climate change.”
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