ESG investments options in defined-contribution plans could cause participants to increase their contribution rate, according to the Schroders 2022 U.S. Retirement Survey.
Seventy-four percent who lack or don’t know if their plan offers ESG investment options said they would or might increase their contribution rate if ESG products were offered. That’s an increase from 69% in 2021, Schroders said.
Most plan participants (87%) want their investments to be aligned with their values, and 78% said they believe companies that are focused on ESG will have better results over time than companies not socially responsible, the survey said.
The survey also found that nine out of 10 of the 31% of 401k plan participants who knew their plan offered ESG options invested in those options, and almost 73% estimated they allocated 50% or more of their assets to socially responsible choices.
Participants who invest in ESG or would if they had the option chose employee welfare/living wage (51%) as the most popular segment that they would like their investment to make an impact. That was followed by climate change/global warming/carbon reduction (39%), human rights (36%), biodiversity (pollution, deforestation, clean water) (30%), diversity and inclusion (22%) and no specific area (17%).
“The message is clear: Defined contribution plan participants want ESG options. And this year, even more participants are telling us that ESG may be a catalyst to save more for retirement,” Deb Boyden, head of U.S. Defined Contribution at Schroders, said in a statement. “This is a compelling reason to believe that ESG could become a significant factor in improving participant retirement readiness while offering an opportunity to maximize risk-adjusted returns for participants."
The Schroders 2022 U.S. Retirement survey of 1,000 U.S. investors ages 45 to 75, was conducted in February by 8 Acre Perspective. It included 317 respondents with employer-provided defined contribution retirement plans.