The pensions provider has allocated £2bn of its pension portfolios in the newly launched Authorised Contractual Scheme (ACS) Climate Transition World Equity Fund.

Climate Transition is a new data-driven investment approach developed by BlackRock that measures a company’s exposure and management to transition risks and opportunities, seeking to provide investors with a broad market approach to invest in the transition to a low carbon economy.

The Fund looks to increase investment in companies that are well prepared for this transition and to reduce exposure to those that are less equipped. It also offers portfolio diversification by providing exposure to companies across sectors, regions, and business maturities.

The transition to a low carbon economy won’t just affect oil and gas companies, but rather all sectors – including hospitality, transportation, and healthcare.

The Fund’s new Climate Transition investment approach has a framework that translates low carbon risks and opportunities into five pillars: energy production, clean technology, energy management, water management and waste management.

To generate an investment signal, BlackRock will score each company’s management of the five pillars into a single Climate Transition (CT) assessment, relative to the peers in their sector.

Maria Nazarova-Doyle, head of pension investments at Scottish Widows, said: “Offering customers more sustainable investment choices, and challenging companies in which we invest to behave more sustainably and responsibly, is a central part of our strategy. Our work with BlackRock to design this new fund, together with our significant investment, will help to engender positive change in the industry; incorporating environmental, social and governance risks into a portfolio can have a meaningful financial impact on performance.”

Sarah Melvin, head of UK at BlackRock, added: “The global shift to zero and low carbon energy sources is underway and is accelerating. The BlackRock Climate Transition World Equity Fund expands our range of sustainable investment solutions, adopting an innovative data driven research approach to sustainability and climate change, and aims to deliver long-term value to clients based on companies’ readiness to transition to a low carbon economy. This marks another milestone in BlackRock’s commitment to helping clients build sustainability into their portfolios.”