The Case for ESG in Defined Contribution Plans: 2019 NAPA 401(k) Summit
In this interview at the NAPA 401(k) Summit, Ed Farrington from Natixis Investment Managers discusses the rising relevance of ESG (Environmental, Social, Governance) investing in defined contribution (DC) retirement plans. Hosted by John Sullivan of 401k Specialist, the conversation focuses on how ESG is reshaping investment strategies and participant engagement.
Farrington clarifies that ESG is not just about values-based investing or negative screening (avoiding “bad” sectors); instead, it’s a framework for identifying strong-performing, risk-resilient companies. He emphasizes that ESG is increasingly used as part of rigorous due diligence.
A key insight: Millennials show strong interest in ESG options—about 70% say they’d be more likely to participate or increase contributions if such options were available in their DC plans. The broader demand is also growing, driven by increased transparency and access to information.
Importantly, Farrington counters the myth that ESG sacrifices performance. He cites research by MSCI showing that companies with strong ESG behaviors tend to perform better over time, with reduced exposure to tail and systemic risks.
Natixis offers a broad suite of ESG-aligned products, including:
- Global green bonds
- Sustainable equities
- The industry’s only ESG-focused target date fund, which is designed as a default investment option in retirement plans.
Key takeaway: ESG isn’t just about ethics—it’s increasingly being recognized as a performance-enhancing, risk-aware investment strategy.
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