In a recent joint study, the US SIF foundation and Mercer found that the number of defined contribution plans in the US offering a sustainable and responsible investing (SRI) choice could double in the next two to three years. The study, Opportunities for Sustainable and Responsible Investing in US Defined Contribution Plans, points out that a sizeable number of the DC plan sponsors responding to the survey (14 percent) already offer one or more SRI options, while an additional 13 percent of survey respondents either are discussing adding an SRI option or intend to do so in the next two to three years.
Key findings from the report are as follows:
• More than four out of five plan sponsor respondents (84 percent) — both those that currently offer SRI options and those that do not — predict that demand for SRI options in retirement plans will increase or remain steady over the next five years.
• For those plan sponsors that currently offer SRI options, the primary reasons for doing so are to align their plans with their organizational missions and to meet employee demand.
• Nearly three in five respondents (58 percent) say they have minimal or no understanding of SRI investment products and indices.
• Whether a plan sponsor offers SRI options bears little correlation to the plan’s size, either by value of assets or number of participants. Rather, it appears that SRI options are most likely to exist where the philosophy is aligned with an organization's objectives and culture. SRI options are more likely to be found in the plans of non-profit, mission-based or public organizations than in corporations.
• Even though staff and participant demand is cited as one of the primary reasons for adding an SRI fund option, more than 70 percent of the plan sponsor respondents that do not offer such options say they believe that SRI options have never been requested by participants. (The survey did not ask plan sponsors whether they had a formal way to elicit or track participants’ potential interest in SRI or other options.)
• A small subset of respondents say they do not offer SRI options but have received participant requests for them. These plan sponsors say the primary reason they have not added SRI options—cited by just under one-quarter of the subset—was that the requests from participants have not reached a sufficient level. Somewhat lesser concerns—cited by under one-fifth of this group—were questions about fiduciary duty and financial performance.
Mercer is a leading global provider of consulting, outsourcing and investment services. Mercer works with clients to solve their most complex benefit and human capital issues, designing and helping manage health, retirement and other benefits. It is a leader in benefit outsourcing.