Morningstar, PAi Partner on ESG PEP

Morningstar Investment Management LLC, a subsidiary of Morningstar Inc., and Plan Administrators Inc. (PAi), a retirement plan administrator and recordkeeper, have announced plans to offer what they say is the industry’s first pooled employer plan (PEP) intentionally designed to limit exposure to material environmental, social and governance (ESG) risks.

The announcement comes one day after the Department of Labor (DOL) issued new proposed regulations about ESG investments in retirement plans. The firms say the Morningstar ESG PEP is expected to launch in early 2022, pending final guidance from the DOL.

The PEP will feature funds that meet Morningstar Investment Management’s investment selection criteria and pursue investment strategies designed to limit ESG risk. Morningstar Investment Management’s investment team uses both the Morningstar Sustainability Rating and interviews with fund managers to ascertain the ESG risk of investments under consideration. The firm says the objective of the Morningstar ESG PEP will be to create as close to a complete ESG lineup as possible, though certain asset classes for which no ESG investment option exists in the market, such as Treasury inflation-protection securities (TIPs) or money market funds, may be represented to help participants diversify their portfolios.

PAi Trust Co. will oversee the plan as the pooled plan provider (PPP). Morningstar Investment Management will select and manage the investment lineup.

“Sustainability is the new face of long-term investing, and we believe every company should be considering ESG risk when designing a retirement plan for their employees,” says Brock Johnson, president of global retirement and workplace solutions at Morningstar Investment Management. “The Morningstar ESG Pooled Employer Plan is designed to empower forward-thinking companies with an opportunity—perhaps for the first time—to offer their workers a retirement plan truly built for the modern era.”

“PAi believes every employee should have access to an employer-sponsored retirement plan. Adding PEPs to their retirement plan options makes it that much easier. Plus, a PEP takes the day-to-day administration off employers’ plates so they can concentrate on running their business,” says Amy Hermann, director of sales and marketing at PAi.

More information about the Morningstar ESG PEP is available here.