Many asset managers appear to be ignoring the Department of Labor’s proposal that would limit envirnmental, social and governance focused investments in defined contribution plans.
According to a new report from Cerulli Associates, 56% of DC investment-only (DCIO) asset managers expect to increase their marketing and distribution of products focused on ESG factors during the next 12 months.
“The regulation is not slowing down marketing and distribution efforts promoting DC-focused ESG products,” according to a press release from Cerulli.
DCIO asset managers offer investments through platforms of nonaffiliated recordkeepers and control most of the $6 trillion-plus 401(k) market.
“Many asset managers stand behind the financial merits of ESG,” says Shawn O’Brien, senior analyst at Cerulli. “Some asset managers tell us they employ ESG screen processes or incorporate ESG factors into their investment analysis across all of their funds.”
About three-quarters of those managers cite risk mitigation as the key reason for using ESG criteria as part of their investment analysis, and two-thirds cite improved alpha opportunities.
Morningstar has reported that through the first half of this year 72% of sustainable equity funds ranked in the top half of their respective Morningstar categories, including strong performance in the first quarter when the U.S. stock market tanked.