Data & Research November 24, 2015

Institutional Investors Increasingly Consider ESG Factors

However, that increase was not seen in corporate retirement plans, according to a Callan survey.
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The number of U.S. institutional investors that incorporate environmental, social and governance (ESG) factors into investment decision making increased from 22% in 2013 to 29% in 2015, according to results of a Callan survey.

The investment consultant’s 2015 ESG Interest and Implementation survey found that, by fund type, foundations (39%) and endowments (37%) have the highest rates of ESG adoption. Public fund usage of ESG factors has nearly doubled in the past two years, from 15% in 2013 to 27% in 2015.

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However, ESG adoption by corporate funds was flat from 2013 to 2015 at 15%. But, the survey revealed substantial differences when plan type is considered. The percentage of corporate defined contribution plans that are incorporating ESG (24%) is significantly larger than the percentage of corporate defined benefit plans (7%) that are doing so.

Incorporation of ESG factors increases with fund size: 35% of funds larger than $20 billion use ESG in some aspect of investment decision making, while 26% of funds with less than $3 billion incorporate ESG factors.

Callan’s survey was conducted in September, one month before the Department of Labor issued an interpretive bulletin to clarify that consideration of ESG factors can be acceptable under the right circumstances. The firm acknowledged the guidance could affect future survey results.

NEXT: Products using ESG factors

Callan conducted a separate survey of its proprietary investment manager database, which tracks more than 7,000 investment products. Overall, 20% of investment managers in Callan’s database have responded to questions regarding ESG practices for their products.

The survey found 14% of all products in Callan’s database utilize ESG in investment decisions. Global equity has the highest percentage of products using ESG factors at 25%, followed closely by real estate (24%) and non-U.S. fixed income (23%). U.S. equity strategies are the lowest at 9%.

When asked why they incorporate ESG into the investment process, the most popular response across asset classes was risk mitigation (48%), followed by alpha generation (27%).

Callan’s 2015 ESG Interest and Implementation survey incorporates responses from more than 240 unique institutional funds representing approximately $2.4 trillion in assets. A report of findings is here.

Data & Research November 24, 2015

DC Provider Mobile Capabilities Increasing

Retirement plan providers continue to place more emphasis on their mobile presence, according to Corporate Insight research.
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Corporate Insight’s latest Retirement Plan Monitor report update finds that in the past year, providers have launched new phone apps, tablet apps and revamped mobile sites.

Only MassMutual introduced a mobile app while three firms unveiled tablet apps: The Principal Financial Group, T. Rowe Price and TIAA-CREF. The tablet apps all mirror the firms’ existing mobile platforms, offering participants a consistent cross-platform experience.

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The Principal and T. Rowe Price introduced new responsive participant sites, thus revamping the mobile browser experience. The new responsive designs not only provide a uniform experience from desktop to mobile but also offer sleeker interfaces and improved organization and navigation.

Most firms with existing mobile platforms enhanced their offerings, including the addition of transactions and tools. Charles Schwab and Transamerica both added transactions for the first time to their mobile platforms – bringing the total amount of firms that offer mobile transactions up to 11 out of 18 – and four expanded their existing capabilities. This time last year, four of 17 firms offered transaction capabilities.

Fidelity, The Principal, Transamerica and Voya Financial added mobile-friendly retirement tools, allowing participants to assess their retirement readiness. Three of the tools allow participants to conduct transactions directly from the results interface. The addition of tools and transactions increases participant engagement and encourages beneficial account changes, Corporate Insight says.

Additional features, such as message centers and document sending capabilities, are slowly appearing on mobile platforms. Sending documents, a feature added by one firm, allows participants to use a phone’s or a tablet’s camera to upload documents, similar to depositing a check on a mobile banking app.

Corporate Insight suggests that going forward, firms should continue to add transactions, tools and features such as the document upload to the mobile experience and continue to incorporate responsive design, considering the increased dependence on phones and tablets over traditional desktop computers.

Looking at actual 401(k), 403(b) and 457 accounts, Retirement Plan Monitor explores the plan participant experience offered by leading defined contribution plan providers. The research analyzes the online and offline user experience, with a focus on website design and usability, online education tools, transaction capabilities, participant account documents, plan fees and more.

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