US SIF Foundation Releases Resource Guide for Plan Sponsors: Adding Sustainable and Responsible Investing Options to Defined Contribution Plans
The five-step guide assists plan sponsors considering the addition of a SRI option to their defined contribution (DC) retirement plans.WASHINGTON, D.C., August 16, 2017 –Building upon increased interest in sustainable investment and recent changes to relevant ERISA guidance, today the US SIF Foundation released a resource for plan sponsors, “Adding Sustainable and Responsible Investing Options to Defined Contribution Plans.” The five-step guide assists plan sponsors considering the addition of a sustainable and responsible investment (SRI) option to their defined contribution (DC) retirement plans. Along with practical tips and suggestions, the guide provides links to additional resources plan sponsors can leverage.
The US SIF Foundation's 2016 Report on US Sustainable, Responsible and Impact Investing Trends showed significant growth in SRI. Total US-domiciled assets under management using SRI strategies grew to $8.7 trillion at the start of 2016—more than one in five dollars under professional management—a 33 percent increase since 2014. At the same time, however, the report showed that less than 1 percent of assets among the 2,390 private sector retirement plans reviewed for the report were invested in funds that explicitly market themselves as SRI.
“We created this report to assist plan sponsors in meeting the demand for sustainable and responsible investment options. Additionally, plan sponsors are aware that recent ERISA guidance changes clarified their ability to offer such plans. We believe that private sector plan sponsors may be looking for ways to better engage their millennial employees and others who want their investments to reflect their concerns and priorities,” said Lisa Woll, CEO of US SIF.
Previous US SIF Foundation research has revealed several reasons for the lack of uptake among plan sponsors. These include plan sponsors' lack of knowledge about performance and about the SRI options available. For some plan sponsors, there may be structural barriers if they are part of third party platforms where the universe of funds is limited.
With a growing body of data indicating that companies with strong environmental, social and governance (ESG) standards have stronger financial performance, as well as the competitive financial performance of SRI funds, defined contribution plans are well placed to enter this marketplace. Additionally, plans can build on the 2015 ERISA guidance which clearly enables fiduciaries to consider ESG factors as part of their investment analysis.
Judy Mares, former Assistant Deputy Secretary at the US Department of Labor, noted “that in issuing the revised guidance, the Department of Labor recognized that ESG issues may have a direct relationship to the economic value of the plan's investment. The rapid increase in investors utilizing ESG criteria is a practice that I am hopeful will become more widely considered by ERISA governed plans.”
About US SIF
US SIF: The Forum for Sustainable and Responsible Investment is the leading voice advancing sustainable, responsible and impact investing across all asset classes. Our mission is to rapidly shift investment practices toward sustainability, focusing on long-term investment and the generation of positive social and environmental impacts. US SIF members include investment management and advisory firms, mutual fund companies, research firms, financial planners and advisors, broker-dealers, community investing organizations, nonprofit associations, and pension funds, foundations and other asset owners. The 8th US SIF Annual Conference will take place from May 30-June 1, 2018 in Washington, DC.
US SIF is supported in its work by the US SIF Foundation, a 501(C)(3) organization that undertakes educational, research and programmatic activities to advance the mission of US SIF. Learn more at www.ussif.org.