“Hey, what about us?”
It’s the strong message Calvert Investments received from participants in a recent survey about socially responsible investing in retirement plans.
The Maryland-based investment firm specializes in “responsible investing strategies,” and conducted the research to generate insights for plan sponsors and consultants about how to increase enrollment and better engage participants in saving for retirement. It found that plan participants are concerned about “challenges facing society and want to be part of the solution.” Seventy percent say supporting causes they believe in is an important part of their life, and nearly nine in 10 retirement plan participants (87%) want investment options that align with their values.
Other key findings include:
- The vast majority of retirement plan participants (82%) were likely to select a responsible investment option if offered by the plan, with nearly one-third of those interested claiming that they would direct all of their plan contributions to responsible investment options
- Most participants (two-thirds or more) assume responsible investing funds will be as good as or better than other mutual funds in terms of risk, volatility and performance
- After being read a definition of responsible investing, 7 in 10 (72%) indicate a likelihood to invest in a responsible investing product in the next 12 months and, among these participants, 47% prefer to invest with a firm that specializes in responsible investing
- Participants who have Responsible Investing options available in their plan, report higher satisfaction with their employer and a higher likelihood to recommend the employer
- Eligible non-participants (56%) are more likely to participate in the plan if it offers a responsible investing option
- Across all participants, the average Responsible Investment Engagement Index score is 62, indicating a positive mindset toward responsible investing
Participants are Engaged in Social Causes and Care about Issues
Supporting causes (70%) and being environmentally responsible (67%) is far more important to participants than having the latest technology (54%), going to the gym (49%), or being active on social media (39%). In addition, plan participants are as concerned about human rights (76%) and fair treatment of employees (76%) as they are about global terrorism (75%) and the Federal budget deficit (71%). Most “give back” in some form, with more than 8 in 10 having donated money or belongings.
There is a Clear Opportunity to Educate Participants about Responsible Investing
Responsible investing options clearly resonate with retirement plan participants, as nearly 9 in 10 say they want their investments to align with their values. There is a clear opportunity, however, to further educate participants given that only 37% say they are familiar with the term “responsible investing.” Once they learned more about it, the vast majority of participants (89%) find the concept appealing with 4 in 10 who find it highly appealing (90% of eligible non-participants also find the concept appealing). Seven in 10 participants said they would consider investing in a responsible investing fund in the next 12 months.
Fifty percent of plan participants strongly agree that all workplace plans should offer responsible investing options. More than half of eligible non-participants (56%) said they would be more likely to use their plan if it included responsible investing options. Those who believe their plan offers responsible investing options are more satisfied with both their plan and employer.
Many Would Consider Investing Some or All Contributions in a Responsible Investing Option
The vast majority of participants (82%) indicated they were likely to select a responsible investment option if offered by the plan, with nearly one-third of those interested claiming that they would direct all their plan contributions to responsible investments. Millennials were the most motivated, with 46% of that segment indicating they would direct all of their plan contributions to responsible options.
In fact, once educated about responsible investing, 72% of plan participants said they would be likely to seek out a responsible investment mutual fund outside the plan in the next 12 months. Of those who would invest in responsible investing mutual funds, 47% prefer to invest with an investment firm that specializes in responsible investing.
Two-thirds of participants assume responsible investing funds will be as good as or better than other mutual funds in terms of risk, volatility and performance.
Impact on Plan and Employer Perceptions
The survey found satisfaction and likelihood to recommend one’s employer is higher among plan participants who are pleased with their retirement plan and that retirement plan satisfaction is higher when participants believe responsible investment options are offered. The study also found that perceiving an employer as trustworthy and a good corporate citizen are as or more important to company loyalty as perceiving the firm as providing competitive salary and offering good benefits.
Responsible investing was also found to be a way to engage eligible non-participants. Fifty-six percent were somewhat or much more likely to participate in their workplace plan if it had responsible investing options.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
