Legal & General Investment Management (LGIM) has launched its Sustainable DC Property Fund, in response to a growing demand from defined contribution (DC) pension schemes to access real assets and to incorporate more ambitious environmental, social and governance (ESG) targets.
Valued at £238 mln (€277 mln), the fund it provides exposure to a diversified portfolio of assets across sectors and aims to achieve both income and long-term capital growth. In addition, it 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.
Michael Barrie, director of fund management for LGIM Real Assets, said: 'Real estate is central in the transition to net zero as buildings play a major role in supporting a low-carbon economy and society.
'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.'
The fund is reshaping an existing property portfolio to include responsible investing as a core target, with explicit environmental, social and governance (ESG) objectives, including net zero operational carbon in the direct property portfolio by 2030.
It is already measuring carbon emissions and has set reduction objectives in line with ‘science-based’ targets, with a particular focus on lowering operational energy consumption. Occupiers are furthermore being screened based on ESG exclusion criteria.
Rob Martin, director of strategy and ESG for LGIM Real Assets, 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.'
Veronica Humble, head of DC investments for LGIM, said: '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.'
