DC plans not using DEI data for investment decisions – T. Rowe Price

Most defined contribution plan sponsors are using diversity, equity and inclusion data from investment managers to satisfy basic due diligence rather than drive decisions on new investment options, according to a consultant study conducted by T. Rowe Price Group.

More than 4 in 5 consulting firms, 81%, said plan sponsors were seeking to satisfy basic due diligence, with only 31% saying they were using DEI information to actively make decisions on new investment options, the study found.

Almost one-third, 31%, however, said plan sponsors are using the data to re-evaluate existing investment options.

The study surveyed 32 consulting and advisory firms, representing more than 33,000 plan sponsor clients and $7.2 trillion in assets under advisement.

On the topic of environmental, social and governance investing, most of the consulting firms surveyed saw active investment management as the way to go. Forty percent said ESG investing is best implemented within DC plans with active investment management, with only 10% favoring passive investments. One-third said ESG is better implemented by enabling participants to access ESG investments through self-directed brokerage windows.

Most consulting firms agreed with the statement that DC plan sponsors will not adopt ESG investment options without further clarity from the Department of Labor, with 29 of the 32 firms rating the statement a 3 on a scale of 1 (do not agree) to 4 (agree most).

They also agreed with the statements that "investment providers should provide more detailed ESG screening, reporting, and monitoring information" and that "the ambiguity of — and reversals in — DOL guidance is problematic," with 28 of the 32 firms rating each statement a 3.1.

The study was conducted from Sept. 20 to Nov. 8.