(Bloomberg) -- Nest Corp., the UK’s biggest pension plan by members, has appointed Lombard Odier Investment Managers to run a new ESG equity fund with a target of exceeding $6 billion in assets in the coming years.

The fund will be an actively managed product focused on climate change mitigation, adaptation, natural capital and social issues, mainly across developed markets, Nest said in a statement. The pensions manager has set a 2030 target for the fund to reach £5 billion ($6.3 billion) in value, with an interim goal of hitting £1.75 billion. 

Nest, which looks after the retirement savings of roughly a third of the UK workforce, estimates that companies operating across the fund’s target themes are currently undervalued. Over time, though, they will be “rewarded by financial markets as disclosure on these topics improves, and technological, regulatory, and structural economic shifts drive future growth in these areas,” Liz Fernando, chief investment officer at Nest, said in a statement. 

“We want to be investing in companies at the forefront of this transformational change,” she said.

About half of Nest’s current £36 billion portfolio is invested in listed equity funds that are managed in a way that aligns with the Paris agreement goal of achieving net zero emissions by mid-century, according to the pensions manager. Nest has a second climate-focused equity offering, the Climate Aware fund, which is managed by UBS Group AG. 

Fernando said she sees the focus on climate themes as a way to “enhance” Nest’s “ability to drive future returns.” The pensions provider expects its total assets under management to grow almost threefold to £100 billion by the end of the decade.   

Lombard Odier is looking for “investible solutions” that are “well positioned” to perform amid the “large-scale economic shifts” associated with global decarbonization efforts, said Thomas Hohne-Sparborth, head of sustainability research at the investment manager. Companies that fit this description may sit in a “niche” part of the market today, but are “close to an inflection point,” he said.  

Jasbir Nizar, UK chief executive at Lombard Odier Investment Managers, said that the “profound changes” now playing out “in business models, in value chains and in the organization of our economy,” are shaping the way in which investments are allocated.


--With assistance from Frances Schwartzkopff.

(Adds interim fund target in 2nd paragraph, additional comment from 5th.)

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