PLANADVISER - January/February 2018 - 42

investment-oriented
Warming
To ESG
Sponsors embracing
companies that do good
" E
SG " investing takes an alternative,
affirmative
approach,
by
embracing companies that
contribute to the general well-being.
ESG methods select companies
based on: how they handle natural
resources, including the air and water-
Environmental; how they act on equality
of pay and opportunity, management of
supply chains, data security and interactions
with customers-Social; and
whether they field diverse and progressive
management teams and directors-Governance.
The strategy has
become well-established among global
institutional investors and is beginning
to take hold in some corners of
the defined contribution (DC) world.
At the start of 2016, 26% of professionally
managed assets in Asia,
Australia and New Zealand, Canada
and the U.S.-equal to $23 trillion-
was managed under some type of
social criteria, according to the Global
Sustainable Investment Alliance. Longtime
advocates include institutions
with charitable inclinations such as
endowments and foundations, but a
2017 survey by consulting firm Callan
Associates found that, after a recent
surge, 25% of U.S. corporate defined benefit (DB) pension
plans had adopted ESG investing, as had 35% of public funds.
Moreover, ESG is popular with individual investors, whose
assets made up one-third of the $8.7 trillion invested sustainably
in the U.S., Callan reported.
However, while there is plenty of effort devoted to
investors, the uptake by 401(k)
ESG among institutional
plans is still small. The 2017 PLANSPONSOR DC Survey:
Plan Benchmarking states that about 12% of plans make
socially responsible options available, and Vanguard's " How
America Saves, 2017 " notes that just 3% of participants who
are offered socially responsible funds use them.
If interest in ESG is concentrated among younger investors,
that suggests potential for growth as their savings build.
In its 2016 survey of DC plan participants, Natixis Global
Asset Management, which launched the first ESG targetdate
fund (TDF) series last spring, found a strong interest in
having a personal connection with investments. About 80%
of participants surveyed wanted their investments to reflect
their personal values, and 62% said they would increase their
contributions toward socially positive investments-72%
among the Millennial cohort. Three-quarters of all respondents
expressed a desire for more options in social investing.
" We now discuss ESG in every meeting we have, " says
Sabrina Bailey, global head of retirement solutions at
Northern Trust, in Chicago. " Smaller to midsize plans have
been reaching out to us, and we've seen a greater increase
in demand than ever, so we've become proactive with sponsors.
Poor environmental, social and governance conduct
by companies hurts their stock prices, so why wouldn't you
42 | planadviser.com january-february 2018 Art by Graham Yarrington
http://www.planadviser.com
PLANADVISER - January/February 2018

Table of Contents for the Digital Edition of PLANADVISER - January/February 2018
