investment-oriented | PLANADVISER January/February 2017

Investing in Harmony

By Lee Barney | January/February 2017

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 younger clients.”

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.”