On the 24th anniversary of Earth Day, relatively few defined contribution plan sponsors offer participants a socially responsible investment option.
But market watchers predict a surge in the number of 401(k) plans offering "green" investment options, with the timing dependent on when the larger mutual fund families begin to offer social and environmental funds within bundled service approaches.
To date, most social investment activity has been from 403(b) and 457 plans, which traditionally use an unbundled approach, said Glen Casey, a consultant with Cerulli Associates Inc., Boston.
Firm market numbers are scarce, but defined contribution plan consultants say they've seen little interest so far in socially responsible mutual funds by 401(k) plan sponsors.
But the lack of socially responsible fund offerings in 401(k) plans can be explained by a reluctance by the "titans of the mutual fund industry to offer green or social mutual funds. ... If Fidelity offered such a fund, you can bet a lot of money would flow that way from 401(k) plan participants," said Mr. Casey.
Two new socially responsible funds were opened for institutional investment March 30, with their providers both hoping to capitalize on the trend toward green investment by 401(k) plans. The Better World Fund, managed by Franklin Research & Development Corp., Boston and distributed by General American Life Insurance Co., Cambridge, Mass., is a commingled equity fund, using stringent environmental and social screens.
Neuberger & Berman Management, New York, introduced the Socially Responsible Fund because "we were hearing strong demand from mutual fund investors, both retail and institutional, said Janet Prindle, partner and fund portfolio manager.
"The fund now allows a wider audience of investors to make socially responsible investments than we were able to accommodate before."