PLANADVISER - January/February 2019 - 46

investment-oriented
Climate Change and ESG
O
ver the last 50 years, investors have slowly broadened
their objectives, from solely seeking maximum
returns to enhancing the welfare of society-
emphasizing investments that care for the environment,
fulfill the social contract, and exercise fair and just corporate
governance. Environmental, social and governance
(ESG) investing, as this philosophy is known, now comprises
$12 trillion in professionally managed assets in the U.S., up
38% since 2016, according to The Forum for Sustainable and
Responsible Investment, or US SIF.
While U.S. institutional investors have embraced ESG
principles-about $9 trillion of the total resides in pension
and endowment funds-ESG has made little headway in
defined contribution (DC) plans. The investment philosophy
is admittedly complex, and there is no clear advantage
in returns, so the reluctance from both sponsors and
participants is understandable, prospective social benefits
notwithstanding.
Not that DC participants are indifferent to the world
around them. " What we hear is that, following any major
The news drives interest in ESG, but the change to widespread adoption is slow
news event, HR [human resources] departments receive
increased calls questioning their plans' investment options, "
observes James Veneruso, senior vice president at consulting
firm Callan Associates, in Summit, New Jersey. " Following
the [school shooting] tragedy in Parkland, [Florida,] clients
told us that participants had been asking about policies for
investment in gun manufacturers. " Participants also express
interest in companies trying to stem climate change.
Sponsors are showing preliminary interest, as well. " ESG
has been a part of the conversation with virtually every
sponsor over the last year, " says Ross Bremen, a partner at
NEPC, a consulting firm in Boston. " But while the conversation
is taking place, it takes years for things to play out in
the DC space. "
" The interest is focused on employees wanting to use their
time, skills and expertise to make a positive impact beyond
their day-to-day jobs, " notes Julia Wilson, director of global
responsibility and sustainability at data analytics giant
Nielsen Holdings in New York. " That can be using their own
skills to make a difference at

PLANADVISER - January/February 2019

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