UBS AM and Aon launch EM climate transition fund

Fund has positive and negative ‘tilts’, compared to a broad EM index

UBS Asset Management and Aon have launched the UBS Global Emerging Markets Equity Climate Transition Fund.

The offering aims to enable investors to support the transition to a low-carbon economy while also taking into account ‘social characteristics’.

UBS AM said it has a ‘rules-based investment strategy’ and targets emerging market companies. It applies positive and negative ‘tilts’, when compared to a broad emerging market index, towards stocks relating to climate change and aiming to decarbonise over time in line with the IPCC’s 1.5°C scenarios.

See also: Directing capital to credit will drive emerging markets’ net-zero transition

The strategy will also seek exposure to companies that align with the UN Sustainable Development Goals relating to health, clean energy, decent work, responsible consumption and production, and climate action.

Aon has seeded the fund with £190m that was previously invested in traditional indexed emerging market equities. Of that, £120m is from Aon’s Defined Contribution Solutions, including the Aon MasterTrust and Aon’s Group Personal Pension Plan. The remaining £70m is from Aon’s Defined Benefit Multi-Asset Strategy.

The new fund follows on from the roll-out of the UBS Global Equity Climate Transition Fund last year.

Ian Ashment, head of portfolio engineering and trading, UBS AM said: “We are proud to once again collaborate with Aon to provide pension plans with the ability to mitigate climate-related investment risks in emerging markets, while also considering social aspects.

“The transition to a low-carbon economy is vital to reduce the risk of climate change, and this fund brings together our proprietary climate aware framework and global stewardship programme to collaborate with companies to work towards a lower carbon future, linking climate action with inclusive growth.”

This article first appeared on ESG Clarity’s sister title Portfolio Adviser.