AUM in Action

Phoenix Takes Twin-track Approach for Climate Solution

Robeco-managed asset allocation targets “diversified source of return” through balanced equity and credit portfolio. 

Phoenix Group, the UK’s largest long-term savings and retirement business, has assigned £338 million of with-profits investment funds to a new multi-asset climate solution that targets sustainability leaders and improvers. This solution, that forms part of Phoenix Life and Standard Life’s wider with-profits strategic asset allocation, will be managed by Dutch asset manager Robeco. 

Phoenix, which holds £300 billion (US$360 billion) of assets under administration, said the solution looks to offer a “diversified source of return that aims to meet the long-term investment objectives for with-profits customers through a balanced portfolio of equity and credit”.  

James Mitchell, Head of Strategic Partnerships and Research at Phoenix Group, told ESG Investor that as well as investing in companies that are “currently doing well for society”, the new solution would also invest in organisations that are “demonstrably showing an appetite for change, and could revolutionise the way that they operate so that they are more sustainable in future”.  

Mitchell said: “It’s really important that both approaches are taken in the context of sustainable investing. If you leave out the latter, you end up in a world where you have a lot of stranded assets and no solutions.” 

The strategic asset allocation split will see 20% each allotted to net zero 2050 climate equities and climate global bonds, 15% to smart energy equities, 10% each to sustainable property equities, smart materials equities, global green bonds and SDG high yield bonds, with the remaining 5% going to smart mobility equities.  

According to Robeco, ‘smart’ is a proxy for advanced underlying sustainable technologies, with the term being “more forward looking and solution-oriented than simply ‘sustainable”. Further, ‘Smart’ strategies look to promote disruptive products and solutions contributing to a greener economy.  

The firm also said both the climate global bonds and global green bonds strategies incorporate “various sustainable investment elements from Robeco’s SI toolbox”. However, they differ in that climate global bonds look to “generate alpha whilst aligning to the 1.5 °C Paris Agreement”, while the global green bond invests in “names funding the transition to a green economy.” 

Robeco was chosen according to Phoenix’s established process for review and assessment of asset managers. The firm holds an A+ score from the Principles for Responsible Investment investor network, and was one of the founding signatories to the Net Zero Asset Managers initiative. It has also been awarded the ‘Leader’ ranking in ESG commitment level by Morningstar.  

“It’s very important that as partners, we have an alignment of objectives, not only regarding investments but also in the way we operate as organisations. It was a consensus that Robeco were best placed to provide us with that solution,” added Mitchell.

Ed Collinge, Global Head of Client Solutions at Robeco, said: “It is exciting to be partnering with a like-minded investor such as Phoenix Group. Sustainable objectives are becoming a cornerstone of many investors’ portfolios and we were delighted to jointly create an innovative solution that seeks to both benefit from and enable the climate transition.”

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