ShareBuilder 401k is adding two ESG investments to its all Exchange-Traded Funds (ETFs) 401k stable, joining a run of companies who are adding sustainable funds to the portfolios to satisfy consumer demand.
The digital 401k provider specializes in low-cost, all-ETF retirement products and resources for small- to mid-sized companies. The latest ESG additions include:
- iShares MSCI USA ESG Select ETF Fund (symbol SUSA) tracks the investment results of an index composed of U.S. companies that have positive environmental, social and governance characteristics.
- S&P 500 Fossil Fuel Free Index (symbol SPYX) is designed to measure the performance of companies in the S&P 500 index that are fossil fuel free – in that they do not own fossil fuel reserves.
The (almost) unstoppable ESG
ESG funds have been on a tear as of late, with many factors contributing to their popularity. According to a recent Natixis survey, 6 in ten of fund selectors are adding ESG options due to investor demand. The consumer interest appears to stem from investors’ heightened social awareness (75%) and the fact that ESG investing has now reached critical mass among mainstream investors (50%). Other factors they say are driving demand for ESG include investors’ desire to be part of a greener economy (42%) and concerns about climate change (36%).
However, when it comes to returns, ESG funds aren’t always in the black. According to Morningstar, funds courting less ESG risk beat their benchmark indexes more often, and by larger average margins, than funds courting more ESG risk in 2020. In 2020, approximately 46% of funds with a low ESG risk generated higher returns than their benchmark while only 30% of funds with a high ESG risk did the same. Low ESG risk funds also bested their benchmarks by larger average margins than funds with higher ESG risk, concluding that there was a better average payoff to investing in funds that courted less ESG risk.
New funds represent first expansion in years
But it appears ESG is trending enough to cause ShareBuilder to join the green bandwagon. The addition of SUSA and SPYX expands the ShareBuilder 401k roster for the first time in over a decade from 20 ETFs to 22 ETFs. Employees may also choose to invest in a money market or select one of the five all-ETF model portfolios offered in ShareBuilder 401k plans.
“Our proprietary analysis, models and investment experts determine the investments within our plans to ensure that our customers have access to high-quality, high-performing funds that are diverse, retirement appropriate and low cost,” said Stuart Robertson, president and CEO of ShareBuilder 401k. “We are pleased to add these funds to cover sectors that are the focus of innovation and are an increasing area of interest among investors.”