Retirement plans offering SRI, could double in the next few years

Socially Responsible Investing (SRI) funds look set to double in the next two to three years, according to a new report released by Mercer and the US SIF Foundation (formerly the Social Investment Forum Foundation).

The number of defined contribution (DC) retirement plans in the U.S offering a SRI choice will either hold steady or grow in the next five years and according to the report titled “Opportunities for Sustainable and Responsible Investing in U.S. Defined Contribution Plans.” The report finds that a sizeable number of the DR plan sponsors report to the survey, 14% of sponsors currently offer one or more SRI options, and 13% are either planning to offer them or are thinking about offering them within the next two to three years.”

The report finds that more than four out of five plan sponsor respondents (both those that currently offer SRI options and those that do not) predict that demand for SRI options in retirement plans will increase or remain steady for the next five years.

According to Lisa Woll, chief executive officer of U.S. SIF, “Today, more and more Americans rely on defined contribution (DC) pension plans for their retirement, and it is clear that SRI options are going to be a bigger part of that picture. Investment flows to DC plans tend to be steady during market downturns, making DC plans an important retirement tool for many workers. The retirement industry regularly analyses the overall investment composition of DC plan assets; however, plan sponsors and participants have had little concrete information about the availability of sustainable and responsible investing options. This year, the US SIF Foundation determined a new survey was needed to fill in that information gap, particularly given the significant growth in SRI, tumult in the financial markets and changes in the DC retirement industry over the last five years.”

The report also finds that for those plan sponsors that currently offer SRI options, the primary reasons for doing so are to align their pans with their organizational missions and to meet employee demand.

Craig Metrick, Mercer Principal and U.S. Head of Responsible Investment said, “”Given the large number of plan sponsor respondents who admit to little or no knowledge of SRI products and indices, education is clearly a critical and a significant opportunity. Thus, better awareness of the variety of SRI funds available and the performance and risk characteristics of those funds could help in expanding the SRI market share in DC plans. In addition, since plan sponsors indicate that demand from participants is the leading driver in their decisions as to whether to add SRI options to their plans, ascertaining whether participants are interested in SRI options is also important.”

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