Doing good and saving for retirement may soon get easier.
BlackRock Inc. and Wells Fargo & Co. are developing their first-ever ESG funds for retirement savings plans, seeking to tap into growing demand for ethical investing. Both firms plan to create a series of target-date funds with this focus, according to people familiar with the matter, with BlackRock aiming to debut some later this year.
The asset managers are betting that a surge in interest in environmental, social or governance investing will carry through to 401(k)s, where there are few such options. While assets under management in ESG funds tracked by Bloomberg rose 37 percent in 2017 to more than $445 billion, less than 10 percent of 401(k) plans now offer such choices, according to Edward Farrington, executive vice president for retirement strategies at Natixis Investment Managers.
The move is aimed at spurring reluctant millennials to invest more for retirement. There’s evidence that a younger generation of investors want such options and have yet to create a nest egg for the future. About two-thirds of millennials have saved nothing for retirement, according to a National Institute on Retirement Security report in February.
Farrell Denby, a BlackRock spokesman, declined to comment on specific plans. Under Chief Executive Officer Larry Fink, the New York-based firm has said companies should align their interests with societal needs. BlackRock engages with about 1,600 companies each year on a range of ESG issues and incorporates them into the company’s investment analysis.
“As a fiduciary to our clients, BlackRock has a responsibility to protect and enhance the value of the assets they have entrusted to us,” Denby said in an emailed statement. “We believe sustainability-related issues can play an important role in driving long term company strategy and economic performance, and thus carefully incorporating these considerations into the investment research and portfolio construction process can enhance long-term risk-adjusted returns.”
A Wells Fargo spokesman, Robert Julavits, declined to comment. Its asset management unit oversees about $500 billion in assets.