Eighty-four percent of 401(k) sponsors surveyed by Mercer and the U.S. SIF Foundation (formerly known as the Social Investment Forum Foundation) believe that sustainable and socially responsible investing (SRI) funds will either hold steady or grow in the next five years.
Additionally, according to the report, “Opportunities for Sustainable and Responsible Investing in U.S. Defined Contribution Plans,” 14% of sponsors currently offer one or more SRI options, and 13% are either planning to offer them or are thinking about offering them within the next two to three years.
“Today, more and more Americans rely on defined contribution plans for their retirement, and it is clear that SRI options are going to be a bigger part of that picture,” said Lisa Woll, chief executive officer of U.S. SIF. “The retirement industry regularly analyzes the overall investment composition of DC plan assets. However, plan sponsors and participants have had little concrete information about the availability of sustainable and responsible investing options.”
This lack of information about SRI prompted Mercer and the U.S. SIF to conduct the survey, Woll said.
Craig Metrick, head of responsible investment in the U.S. at Mercer, added: “Given the large number of plan sponsor respondents who admit to little or no knowledge of SRI products and indices, education is clearly a critical and a significant opportunity. Thus, better awareness of the variety of SRI funds available and the performance and risk characteristics of those funds could help in expanding the SRI market share in DC plans. In addition, since plan sponsors indicate that demand from participants is the leading driver in their decisions as to whether to add SRI options to their plans, ascertaining whether participants are interested in SRI options is also important.”
However, even plan sponsors need education on SRI, as 58% said they have minimal or no understanding of SRI products and indices. The survey also found that SRI options are more common at non-profit, mission-based or public organizations than at corporations.
-- This article first appeared on Money Management Executive.
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