London Stock Exchange Group welcomes Pensioenfonds Detailhandel’s FTSE Euro Credit SDG-Aligned Index fund
Working closely with index provider FTSE Russell and asset manager BlackRock, Pensioenfonds Detailhandel is making its third significant sustainable investment based on UN SDGs, with a EUR 3 billion allocation in the credit market. The custom built FTSE Euro Credit SDG-Aligned Index, which is used as the benchmark for the new passively managed fund, is one of the first of its kind.
The new index is designed to provide a diversified bond benchmark. In 2019 and 2020, the pension fund collaborated with the same partners to introduce indices for developed and emerging market equities portfolios representing a value of over EUR 11 billion. With the EUR 3 billion allocation to the credit market, almost half of the assets under management of Pensioenfonds Detailhandel are now in line with selected SDGs.
Pensioenfonds Detailhandel aims to provide a good pension to its 1.2 million participants and is convinced that responsible investing also means creating long term value. The pension fund encourages the companies in which it invests to deal responsibly with their employees, society and the environment. A recent survey by Maastricht University among the fund's participants showed that there is great support for making the investment portfolios more sustainable.
The FTSE Euro Credit SDG-Aligned Bond Index measures the performance of fixed-rate, EUR denominated, investment-grade credit bonds, incorporating a tilting methodology that adjusts index weights according to the specified UN’s SDG framework. The SDGs considered most important by the participants of Pensioenfonds Detailhandel are included in this index:
- Decent work and economic growth (SDG 8)
- Responsible consumption and production (SDG 12)
- Climate action (SDG 13)
- Peace, justice and strong institutions (SDG 16)
This results in a benchmark that achieves the following when compared with the market-capitalisation weighted ‘parent’ index for corporate bonds only:
- Carbon emissions reduction 69%
- Green Bond allocation increase 69%
- Fossil Fuel Reserves reduction 62%
An additional index overweight is applied to green bond constituents in the benchmark as defined by the Climate Bond Initiative.
To read the full index methodology, please click here. The characteristics of a passively managed portfolio are maintained.