401K Participants Say ESG Options Could Lead Them To Increase Contributions

According to the Schroders 2022 U.S. Retirement Survey, 74% of defined contribution plan participants who lack or don’t know if they have ESG investment options in their plan, said they would or might increase their contribution rate if offered ESG options. This is up from 69% who said the same in 2021.

The vast majority (87%) of plan participants said they want their investments to be aligned with their values. They also see ESG as a driver of performance: 78% said they believe companies that are socially responsible (ESG focused) will have better results over time than companies not socially responsible.

“The message is clear: defined contribution plan participants want ESG options. And this year, even more participants are telling us that ESG may be a catalyst to save more for retirement. This is a compelling reason to believe that ESG could become a significant factor in improving participant retirement readiness while offering an opportunity to maximize risk-adjusted returns for participants,” said Deb Boyden, Head of U.S. Defined Contribution at Schroders.

Of the 31% of 401k plan participants who knew their plan offered ESG options, nine out of ten invested in those options, and almost three-quarters (73%) estimate they allocate 50% or more of their assets to socially responsible choices.

“When choosing investments options for a defined contribution plan, companies should seek products that meet participants’ investment goals and align with their investment priorities and values,” said Marina Severinovsky, Head of Sustainability, North America at Schroders. “While ESG is most often associated with climate or decarbonization, according to our 2022 U.S. Retirement Survey, the top ESG issues for US investors are actually social in nature – focused on workers and communities. It’s vital that plan sponsors keep this in mind as the regulatory landscape evolves and more ESG options find their way onto 401k menus.”

Where Participants Want Impact

Asked to determine which ESG segments they would like their investments to make an impact on, plan participants that currently invest in ESG or would if they had the option, said:

• Employee welfare/living wage – 51%
• Climate change/global warming/carbon reduction – 39%
• Human rights – 36%
• Biodiversity (pollution, deforestation, clean water) – 30%
• Diversity and inclusion – 22%
• No specific area – 17%

About the Survey

The Schroders 2022 U.S. Retirement survey was conducted by 8 Acre Perspective among 1,000 U.S. investors nationwide ages 45 –75 from February 17 – February 28. 2022. The survey included 317 respondents with employer-provided defined contribution retirement plans.

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Schroders plc

Founded in 1804, Schroders is one of Europe’s largest independent investment management firms by assets under management. As at 31 December 2021, assets under management were £731.6 billion (€871.3 billion; $990.9 billion). The founding family remain a core shareholder, holding approximately 48% of the firm’s voting shares. Schroders has continued to deliver strong financial results. It has a market capitalisation of over £8 billion and employs over 5,500 people across 37 locations.