Canadian ESG-related investment assets surge to $3.2 trillion: report

While there’s broad interest in environmental, social and governance factors, the majority of U.S. defined contribution pension plan consultants said their plan sponsor clients are looking for further clarity on the Department of Labor’s proposed guidelines before incorporating ESG into their investment options, according to a new survey by the Schaus Group and T. Rowe Price Group Inc.

The survey, which polled 32 DC plan consultants and advisory firms that provide services to more than 33,000 plan sponsors, found 40 per cent of respondents said they prefer actively managed ESG investment strategies, while just 10 per cent preferred passive ESG investment strategies. Respondents also indicated more detailed ESG screening, reporting and monitoring should be provided by investment providers.

When asked about features that could strengthen the trend of plan members remaining in their DC plans post-retirement, respondents cited measures such as lower costs for comparable investments versus a rollover individual retirement account, flexibility in drawing down assets and investment solutions that generate income.

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Consultants also indicated that simple systematic withdrawal capabilities as the most appealing retirement income solution, followed by multi-asset investment solutions, such as managed accounts with income planning features and target-date fund investments with embedded managed payout features.

Regarding the financial wellness of plan members, 76 per cent of consultants said DC plan sponsors are signalling greater interest in emergency savings and 60 per cent reported greater interest in debt management. While the majority of respondents reported fewer than 25 per cent of their plan sponsor clients currently offer emergency savings programs, 83 per cent of consultants expect this figure to increase in the next three to five years.

And respondents said plan sponsors are increasingly evaluating investment managers’ diversity, equity and inclusion baseline reports to satisfy basic due diligence. However, only 31 per cent of plan sponsors are using DEI information to actively drive decisions on new investment options.

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