There’s been an incredible amount of interest in environmental, social and governance investing of late, especially among younger 401k investors, something Natixis Global Asset Management is experiencing firsthand—and with good reason.
In late February, the firm launched the industry’s first set of target date funds focused on the ESG space, appropriately called the Natixis Sustainable Future Funds.
Offering 10 funds with dates ranging every five years from 2015 to 2060, they select securities based on ESG criteria with respect to issues such as fair labor, anti-corruption, human rights, fair business practices and mitigation of environmental impact.
“We’ve had a lot of incoming calls inquiring about the underlying methodology,” Matthew Garzone, AIF, senior vice president of the Retirement Strategies Group with Natixis, said from the floor of the 2017 NAPA 401k Summit in Las Vegas. “They especially want to know about the constituent parts that comprise the target date, as well as the metrics and due diligence around the portfolios.”
While Natixis overall might be new to ESG investing, it’s leveraging the expertise of one of its subsidiaries, Mirova, which has managed “responsible” investment solutions for almost 30 years. It’s also partnered with Wilshire Associates to sub-advise on the glide path design and portfolio allocation services, so it’s safe to say the expertise is there.
“There are six different investment parts,” Garzone added. “There are three equity screens (some of which are passive) and three fixed income screens. It’s a huge commitment for our firm, and all the data we’ve seen finds a huge demand for ESG investments.”
He disagreed with arguments made by ESG critics—that it’s better to invest for maximum return and invest the profits in causes one cares about than to risk lower payouts that potentially come from attempts at responsible investing—countering that it results in better long-term performance for the portfolio.
Indeed, he pointed to Natixis research that 82 percent of investors want their investments to reflect their personal values. For plan sponsors looking to encourage savings, he explained, Natixis findings show that six in 10 respondents would be more likely to contribute or increase contributions to their retirement plan if they knew their investments were doing social good.
Moreover, the research found that nearly three-quarters of respondents would like to see more socially responsible investments in their retirement plan offerings and most believe it is important to make the world a better place while growing their personal assets.
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.
