There is an enormous gap in ESG use between public and private retirement plans, survey data published by the Callan Institute show.
About one in 20 corporate defined-contribution plans includes an investment option that is labeled as an environmental, social and governance product, according to the new report. By comparison, 43% of public and nonprofit DC plans include such options. ESG investments also represent a small slice of all DC plan assets, at an average of 1.2%.
A forthcoming rule from the Department of Labor could change that. Last month, the regulator published a proposed rule that would walk back regulations finalized at the end of the Trump administration that had a chilling effect on the use of ESG in 401(k)s and other plans. Under the Biden administration, the DOL is making clear that ESG factors are financially material considerations that plan fiduciaries can or should make.
Crucially, the regulator is reversing its stance on the use of ESG in the default investments in retirement plans, such as target-date funds. Under a rule finalized last year, those investments were prohibited outright.
That change alone has the potential to give ESG a considerable boost within DC plans.
In its survey in May and June of 114 U.S. institutional investors, Callan found that 40% of entities that have not previously used ESG said that they are now considering it. Among those that have, 55% described the decision to do so as a way to bring their portfolios in line with their values.
The survey included responses from DC and defined-benefit plan sponsors, endowments and foundations, and plan sizes ranged from small to as big as $20 billion.
Across the different plan types, the sectors that were most likely to include ESG were government (63%), nonprofits (57%), education (50%) and financial services (40%), according to Callan.
Although nearly half of all respondents said they incorporate ESG criteria in their investments, the majority (55%) of those that have said they started that practice between 2016 and this year, the survey found.
The report also found that larger entities are considerably more likely to use ESG than smaller ones.
But geography is also a factor. While 63% of respondents in the Northeast use ESG, just 38% of those in the Central states do so, Callan found. The rates are 42% in the Southeast, 40% in the Mountain states and 50% on the West Coast.
Chicago-based Mesirow Fiduciary Solutions adds flexPATH's plan-level outsourced fiduciary book, boosting its retirement market reach to $164 billion.
Also, Raymond James's employee advisor channel adds breakaways from Wells Fargo and Stifel, while UBS welcomes an ex-Morgan Stanley duo in Indiana.
It promised guaranteed principal and 10% monthly returns. The SEC says it invested nothing.
Ten years after entering the fee-based annuity market, MassMutual Ascend says nearly half its lifetime sales came in the past two years alone – but barriers remain among fee-only advisors.
Amplify, WealthReach, Zeplyn and Zocks have unveiled partnerships aimed at automating portfolio management, content creation, account opening, and client communication.
Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains
Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income
