As the concept of responsible investing gains traction in the U.S., defined contribution plan sponsors and consultants may be well advised to note the findings of a study released Friday by Calvert Investments.
Employees who had access to responsible investing options in their retirement plans were more satisfied with their employers than those who didn’t, the study found.
The study explored participants’ familiarity with and receptivity to responsible investing. It also looked at how including responsible investing plan options would affect engagement with a company’s plan and attitudes about the employer.
Calvert, a provider of responsible investments, defines RI as investing in companies that are good in terms of environmental stewardship, respect for human rights and strong governance practices.
The research was conducted by 8 Acre Perspective, which polled 1,231 defined contribution retirement plan participants, including 401(k), 403(b) and 457 plan participants, and 295 eligible nonparticipants, between July 29 and Aug. 10.
Plan participants in the study expressed concern about challenges facing society, and wanted to be involved in solving them.
Seventy percent said supporting causes they believed in was an important part of their life, and 87% said they wanted investment options that aligned with their values.
The research showed that 82% of retirement plan participants were likely to select a responsible investment option if one were offered by their plan, and 32% of those interested said they would direct all of their plan contributions to such options.
Millennials, in particular, were more likely to direct all of their plan contributions to responsible investing mutual funds if these were on offer, the survey found.
Fifty-six percent of eligible nonparticipants were also more likely to participate in the plan if it offered a responsible investing option.
For companies that have yet to offer responsible investing options, educating employees can lead to widespread interest among participants in exploring this investment opportunity, researchers found.
After being read a definition of responsible investing, 72% of those polled said they would likely invest in a responsible investing product in the next 12 months.
Millennials, Asian-Americans and African-Americans were most likely to consider responsible investing mutual funds in the upcoming year.
In addition, 47% of participants said they preferred to invest with a firm that specializes in responsible investing rather than a generalist firm.
Some two-thirds of participants assumed that responsible investing funds would be as good as or better than other mutual funds in terms of risk, volatility and performance.
And more than half said they would be willing to pay more for these funds.
In a finding that should put companies on alert, 61% of participants who had responsible investing options available in their plan reported high satisfaction with their employer, compared with 44% who did not have these options.
Those with responsible options were also likelier to recommend the employer.
“These findings give a clear indication to plan sponsors that participants not only want them to offer a responsible investing option, but that by doing so, many plan participants would feel better about the plan and their employer,” Lynne Ford, Calvert’s executive vice president of distribution, said in a statement.
Calvert didn’t explore whether the ability to invest in RI funds made employees happier or the companies that offered them simply were more likely to treat their employees better.
The study also included a Responsible Investment Engagement Index, created from respondents’ ratings of 10 questions. Each respondent could receive a score of zero to 100 based on their individual ratings.
Across all participants, the average score was 62, indicating a positive mindset toward responsible investing, Calvert said in the statement.
Female, millennial and African-American respondents, each with a score of 65, skewed higher than their male (60), generational (Gen X 63, boomer 59) and Caucasian (62) counterparts.
As well, companies with between 500 and 999 employees scored significantly higher on the index than both smaller and larger firms.