BlackRock, RetireOne and Midland National have teamed up to offer what they say is the first-ever ESG option in a Fixed Index Annuity (FIA).
This is significant considering that the demand for socially responsible financial products has increased 42% in the last two years, according to United States Forum for Sustainable and Responsible Investment.
On Feb. 25, Midland National Life Insurance Company announced the addition of the BlackRock ESG US 5% Index ER to help customers take advantage of the burgeoning growth in sustainable financial products. IndexMax ADV, exclusively available on the RetireOne platform, offers three index options in the dual crediting strategy for accumulation growth potential.
“Designing annuities for fiduciaries demands that we deliver great client outcomes while seizing the growing opportunities in products that are focused on environmental, social, and governance—or ESG—options,” said Jill Esser, Vice President, Annuity Product Development at Sammons Financial Group. “ESG options are attractive to some customers wanting to address the long-term viability of companies facing the global climate crisis and critical social change. We anticipate that this index will enjoy strong customer demand due to both its focus and performance.”
BlackRock Index Services developed the index as part of its stated commitment to increasing access to sustainable investing through indexes that are linked to FIA products.
The IndexMax ADV is a fixed index annuity product that layers in potential annual performance credits with additional 5- or 7-year term participation credits to provide rates guaranteed for the term. Designed for fee-based advisors, the FIA offers two additional indexes for its layered crediting strategy: the Fidelity Multifactor Yield Index 5% ER and the S&P 500 Low Volatility Daily Risk Control 5% Index ER.
The index seeks less exposure to environmental risk, and more exposure to sophisticated companies with high-level risk controls which attract and retain skilled workers and customers. As examples, these securities may increase the fund’s proportion of companies focused on lowering carbon emissions, emphasizing workforce diversity, and strengthening data privacy and security.
“Companies with strong ESG policies are in an ideal position to perform over the long run, so it is imperative to include ESG principles in portfolio design,” said David Stone, Founder and CEO of RetireOne. “In this low-rate environment, clients of RIAs are seeking the kinds of protections afforded by fixed index annuities. As demand for socially responsible financial products increases… an ESG index can provide a valuable option to clients.”
While ESG strategies currently comprise roughly 33% of U.S. assets under professional management, the Deloitte Center for Financial Services (DCFS) estimates that demand will drive ESG-mandates assets to account for half of all professionally managed investments in the U.S. by 2025.
“We think the trend toward greater company disclosure and clearer understanding of how ESG risks affect investment returns will spur increased adoption of sustainable products,” said Anne Ackerley, Managing Director and Head of BlackRock’s Retirement Group. “The BlackRock ESG US 5% Index ER exemplifies our commitment to increase access to sustainability solutions through index innovation.”
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
