UK-based Legal & General Investment Management (LGIM) has launched an equity index fund investing in environmentally sustainable companies.
The L&G Future World Equity Factors Index Fund, which is managed by LGIM’s index team, mirrors the Future World Fund launched in November 2016.
The fund aims to provide capital and income growth and tracks the FTSE All-World ex Controversial Weapons Climate Balanced Factor Index. It has a ‘climate tilt’ so it can reduce exposure to companies with poor carbon and fossil fuel records while increasing exposure to companies generating revenue from low-carbon assets.
The fund targets risk-adjusted equity returns by including investment factors such as value, low volatility, quality and size in the design of its benchmark index.
LGIM said it had identified the largest companies in six sectors critical to the shift to a low-carbon economy and ranked them against criteria such as commitment to the low-carbon transition, board composition, strategy and transparency. Companies that do not meet minimum expectations are excluded from the fund if engagement fails.
Anton Eser, chief investment officer at LGIM, said: “We are on the path to a low-carbon economy and companies that fail to respond to this reality present a risk to investors’ portfolios.”
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