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Millennials embrace ESG option in Bloomberg’s 401(k) plan

The entrance to Bloomberg LP’s offices in Washington. The company’s DC plan executives wondered whether an ESG fund would add value to employees’ investment choices.

Millennials are the largest identifiable group that has elected to participate in the ESG-focused fund in Bloomberg's $2.5 billion U.S. 401(k) plan, said Cathy Bolz, global head of benefits at Bloomberg LP in New York.

The finding "aligned with our expectations," Ms. Bolz said.

Just under 1% of the plan's total assets are invested in the Parnassus Core Equity Fund, which focuses on socially conscious U.S. large-cap companies,

"If we look at our universe of funds outside of the target-date funds and qualified default funds, Parnassus has a nice percentage," Ms. Bolz said.

Prior to adding the Parnassus Investments fund, Ms. Bolz said plan executives asked themselves, " 'whether or not our employees would enjoy having these funds in (the plan) and whether it would add value.' "

"To our own business, we felt there was a growing interest in funds of this nature," she said. "We have different indexes that track performance of various funds and the impact on environment. ... Just by virtue of the volume of people looking at the information through our terminal, we could tell that the demand for that type of information was increasing."

The Parnasuss fund, which was added in 2015, is currently the only ESG-focused fund in the lineup. However, plan executives have since updated the plan's investment policy to integrate ESG considerations into plan management and monitoring decisions, which includes making every effort to identify at least one fund that considers ESG factors in every fund search, Ms, Bolz said.

Just because funds have an ESG designation does "not guarantee that they (will) be put to the top of the list or even selected," Ms. Bolz emphasized. If after a rigorous evaluation an ESG-focused fund "stands as tall as any other competitive fund, then we would consider adding" it, she said.

Over the one, three, five and 10 years ended Dec. 31, the Parnassus fund returned 20.15%, 11.39%, 14.13%, and 10.98%, respectively. Over the same periods, the S&P 500 index, the fund's benchmark, has returned 26.34%, 14.17%, 15.68%, and 9.65%, respectively.

While Bloomberg incorporated ESG considerations into its investment policy, Jason Shapiro, New York-based investment consultant and a member of the defined contribution steering committee at Willis Towers Watson PLC, said that is not something he is seeing DC executives do broadly. Outside of plans that are adding or considering ESG funds and want to update their investment policies to reflect those considerations, Mr. Shapiro said that he has not seen ESG make it into broader investment policy conversations. ​

Ms. Bolz said that she believes that some of the hurdles that prevented plan executives from considering ESG options in the past have come down.

"Take for example the lack of a track record," Ms. Bolz said. "Four years ago that was probably a real concern. Today, there are a number of strong performing funds that have a three-year track record."

Ms. Bolz said the plan's investment consultant, Mercer, and Mercer's sustainability team, helped plan executives assess the ESG landscape.

Beyond considering ESG-focused funds, Bloomberg is taking other steps to integrate ESG considerations into its plan management and monitoring.

Plan executives are in the process of reviewing ESG exposures across the lineup. They also are in the beginning stages of analyzing the plan's carbon emissions footprint, Ms. Bolz said.