In addition, the number of investment vehicles that use ESG
or SRI screens is increasing, notes Meg Voorhes, deputy director and research
director at US SIF. In recent years, a number of retirement industry trade
groups such as the Plan Sponsor Council of America have asked US SIF officials
to speak at their annual conferences, she says.
Thus, Orsagh says, it is inevitable that retirement plan
advisers will increasingly be paying heed to the phenomenon.
Investors’ interest in sustainable investing cannot be
ignored, according to the Morgan Stanley Institute for Sustainable Investing’s
2015 report “Sustainable Signals.” Seventy-one percent of investors are
interested in sustainable investing, and 65% expect it to become more prevalent
in the next five years. Millennials and Gen X are twice as likely as the
investing population at large to invest in companies or funds that target
specific social or environmental issues, Morgan Stanley reports.
As investors’ retirement plan assets are their biggest
holding, it makes sense for sponsors and advisers to consider adding ESG
options to the lineup, says George Walper, president of Spectrem Group in Lake
Forest, Illinois. The reason for Millennials’ and Gen Xers’ interest in ESG
investing, he says, is a desire to “give something back to society and, in the
case of environmental investing, protect the planet for their children and
grandchildren,” he says. “Clearly, this is a sound way for advisers to attract
ESG can be a powerful motivating factor to get younger
people to join their plan, Crum agrees. “If you were to tell a young person
that he has an ESG option in his retirement plan, he would very likely be
willing to part with his money.” And engaging young people at an early age is
important, she adds.
Paul Hilton, partner and portfolio manager in the Boston
office of Trillium Asset Management, a firm that has been using ESG factors to invest since 1982, says the single biggest ESG issue that resonates for Millennials and Gen X is the environment, due to
concerns about climate change. “We have never seen as much interest in ESG as
in the past five years,” Hilton says. “It’s growing much faster than the
broader market, and advisers are finally beginning to understand the demand. We are at a tipping point.”