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  2. DEFINED CONTRIBUTION
October 15, 2020 02:12 PM

Sustainable funds hard to find in DC plan lineups – report

Brian Croce
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    Though ESG investing has become more mainstream in recent years, a majority of defined contribution plan lineups do not include an offering that qualifies as an intentional sustainable fund, according to a whitepaper from Morningstar.

    As of 2016, 4.5% of DC plans included at least one investment offering that qualifies as an intentional sustainable fund, which are funds for which ESG incorporation and impact are an intentional focus of their investment process, the whitepaper titled "Do Investors Have ESG-Investing Options in Their DC Plans?" found.

    Moreover, more than 1 in 5 (22%) DC plans in 2016 included at least one fund that now considers environmental, social and governance factors, the report noted.

    The research, which was published Oct. 8, used 2016 Form 5500 data coupled with 2019 sustainability metric data, resulting in 2016 lineups with up-to-date sustainability information for each of those options. This allowed the authors to conduct an "as if" analysis: If plan lineups had remained the same, what would their sustainability characteristics be now?

    The authors noted that ESG in the U.S. has become more popular since 2016, and expect that their analysis is a conservative estimate of ESG options in retirement plans. Given that many intentional sustainable investments have been launched since 2016, "the analysis concerning the accessibility of these types of funds may be incomplete," the authors wrote.

    In 2019, Morningstar published a report that found that 72% of Americans were interested in ESG investing.

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    December 12, 2022 page one

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    • Topics
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      • Actively Managed
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      • ESG Sustainability - Gaining Momentum
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      • Innovation in ESG Investing
      • 2023 ESG Investing Conference
      • ESG Rated ETFs
      • Divestment Database
    • Defined Contribution
      • Latest DC News
      • The Plan Sponsor's Guide to Retirement Income
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      • 2023 Defined Contribution East Conference
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      • Searches & Hires Database
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