Retirement plan participants continue to take greater interest in aligning their investment decisions with their personal values and beliefs. The growing demand for this style of investing has caused retirement plan committees and plan sponsors to make considerations on the inclusion of environmental, social, and governance (ESG) factors when making investment decisions on behalf of their plan. Research indicates that ESG factors are not only being considered for their merit in promoting a better environment for us to work and live, but also for the potential of better returns within their portfolio. As this trend continues to grow, market demand will present new players and opportunities for the industry to consider when looking for an ESG option. The increased demand has also created added pressure for investment managers and companies alike to present stronger due diligence and evidence of their commitment and execution of the principles that make them suitable ESG options.
With the prospect of this style of investing becoming more commonplace in our industry, it's important for plan sponsors to start the conversation of its inclusion in their due diligence process. For many years the Department of Labor has debated the acceptance of affording fiduciaries the option of considering factors, such as ESG, that were not directly tied to risk, return, and outcome. As you will see from recent legislative updates in the article below, there are a number of questions left to be answered on the topic and we will continue to keep you informed.
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If you have any questions about ESG investing and how it may play a role in your retirement plan, please reach out to Aaron Siekmann for more information.