Investing

Sponsors Use ESG to Incent Greater Savings

Natixis research sees “plenty of potential” to incorporate strategies that consider ESG criteria to incent younger investors to increase their participation in company-sponsored retirement plans.

By John Manganaro editors@plansponsor.com | June 16, 2017
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Natixis Global Asset Management’s 2017 ESG Report outlines the rising importance placed on environmental, social and governance (ESG) investing.

Aided by the fact that the Department of Labor (DOL) has made ESG investing within retirement plans more palatable from the plan sponsor fiduciary risk perspective, ESG has become a key driver in getting more investors, across generations, to invest more or even start planning for retirement, according to Natixis researchers. 

The Natixis analysis looks across three investor populations, “including institutional decision makers, financial advisers, individual investors and participants in defined contribution plans in the U.S.,” finding each group is enthusiastic about pursuing ESG opportunities.  

“Individuals clearly tell us that they want their investments to reflect their personal values. The environmental, social and ethical records of the companies included in their investment portfolios matter to investors,” explains David Goodsell, executive director of the Durable Portfolio Construction Research Center at Natixis Global Asset Management.

Goodsell sees “plenty of potential” to incorporate strategies that consider ESG criteria to incent younger investors to increase their participation in company-sponsored retirement plans. Eighty-four percent of Millennials say they would save more for retirement if their plan offered an ESG option, he notes. “We see a real desire from Millennials to ensure that their money does social good.”

Another positive development is the growing maturity and sophistication of ESG products now offered to investors. The marketplace is not just comprised of products that “screen out sin stocks,” for example companies that sell firearms or tobacco. Rather, ESG investments today encompass a wide variety of deeply researched and nuanced strategies that set portfolio weights according to factors such as resource and waste efficiency, exposure to water scarcity or climate change concerns, etc. 

NEXT: ESG Is Not a Political Act 

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