Designing a Default Fund Aligned to the Climate Beliefs of its Members

10 second summary

• We designed and implemented a new DC default fund for the HSBC Bank Pension Scheme that aligned with both the return requirements and environmental beliefs of members.

What was the problem?

• The HSBC Bank Pension Scheme wanted to create a default DC Scheme that aligned with the climate beliefs of its members whist remaining within the charge cap.

What was our solution?

• The first step was to select a fund manager. After carrying out detailed research and discussing the challenge, we selected L&G.
• We briefed them to design a fund that matched the environmental criteria of the members whilst meeting a risk/return profile that aligned with the Scheme’s overall objective.
• Our Risk Assessment team and CIO delved into the figures using our proprietary modelling and analysis to assess whether the fund had the potential to produce good risk-adjusted returns in the future.
• Once we were happy with the resulting fund (the LGIM Future World Fund), we provided guidance on Scheme communications to make members aware of the changes to the default strategy.

What was the outcome?

• We, along with L&G, successfully built and launched the LGIM Future World Fund: a passive factor-based global equity fund, designed for DC schemes looking for an alternative to a traditional index strategy that addresses the long-term financial risks of climate change.
• The fund allows HSBC members to reflect their views on climate change without sacrificing their future retirement income.

What does this mean for you?

• We can help you design and implement a default fund that meets both the return requirements and environmental beliefs of its members.