US SIF Foundation/Mercer Report: U.S. Retirement Plans Offering SRI Options Could Double in Next Three Years

Survey:   Four Out of Five Plan Sponsors Expect Demand for Sustainable and Responsible Investing (SRI) Options to Grow or Hold Firm Over Next Five Years

WASHINGTON, Sept. 27, 2011 /PRNewswire-USNewswire/ -- The number of defined contribution (DC) retirement plans in the United States offering a sustainable and responsible investing (SRI) choice could double in the next two to three years, according to a new report released today by Mercer and the US SIF Foundation (formerly the Social Investment Forum Foundation).  

Titled "Opportunities for Sustainable and Responsible Investing in US Defined Contribution Plans," the report finds that a sizeable number of the DC plan sponsors responding to the survey (14 percent) already offer one or more SRI options, while an additional 13 percent of survey respondents either are discussing adding an SRI option or intend to do so in the next two to three years.  

The US SIF Foundation/Mercer report also finds that more than four out of five plan sponsor respondents (84 percent) — both those that currently offer SRI options and those that do not — predict that demand for SRI options in retirement plans will increase or remain steady over the next five years.  

The full US SIF Foundation/Mercer report is available online at http://www.ussif.org/resources/pubs/.

US SIF CEO Lisa Woll said:   "Today, more and more Americans rely on defined contribution (DC) pension plans for their retirement, and it is clear that SRI options are going to be a bigger part of that picture.  Investment flows to DC plans tend to be steady during market downturns, making DC plans an important retirement tool for many workers.  The retirement industry regularly analyzes the overall investment composition of DC plan assets; however, plan sponsors and participants have had little concrete information about the availability of sustainable and responsible investing options. This year, the US SIF Foundation determined a new survey was needed to fill in that information gap, particularly given the significant growth in SRI, tumult in the financial markets and changes in the DC retirement industry over the last five years."

Mercer Principal and US Head of Responsible Investment Craig Metrick said:  "Given the large number of plan sponsor respondents who admit to little or no knowledge of SRI products and indices, education is clearly a critical and a significant opportunity.  Thus, better awareness of the variety of SRI funds available and the performance and risk characteristics of those funds could help in expanding the SRI market share in DC plans.  In addition, since plan sponsors indicate that demand from participants is the leading driver in their decisions as to whether to add SRI options to their plans, ascertaining whether participants are interested in SRI options is also important."  

OTHER  KEY REPORT FINDINGS

• For those plan sponsors that currently offer SRI options, the primary reasons for doing so are to align their plans with their organizational missions and to meet employee demand.
• Nearly three in five respondents (58 percent) say they have minimal or no understanding of SRI investment products and indices.
• Whether a plan sponsor offers SRI options bears little correlation to the plan's size, either by value of assets or number of participants.  Rather, it appears that SRI options are most likely to exist where the philosophy is aligned with an organization's objectives and culture.  SRI options are more likely to be found in the plans of non-profit, mission-based or public organizations than in corporations.
• Even though staff and participant demand is cited as one of the primary reasons for adding an SRI fund option, more than 70 percent of the plan sponsor respondents that do not offer such options say they believe that SRI options have never been requested by participants.  (The survey did not ask plan sponsors whether they had a formal way to elicit or track participants' potential interest in SRI or other options.)  
• A small subset of respondents say they do not offer SRI options but have received participant requests for them.  These plan sponsors say the primary reason they have not added SRI options—cited by just under one-quarter of the subset—was that the requests from participants have not reached a sufficient level.  Somewhat lesser concerns—cited by under one-fifth of this group—were questions about fiduciary duty and financial performance.

METHODOLOGY
Earlier this year, US SIF Foundation commissioned Mercer to conduct a survey of U.S. defined contribution retirement plans in order to gain a picture of the extent to which DC plans today are considering or offering sustainable and responsible investing options.  This report, which presents the results of this survey, documents the current state of DC plans' awareness and inclusion of SRI options and provides a look at the future of SRI from the perspective of plan sponsors.

The survey was sent to more than 13,000 DC plan sponsors potential respondents representing corporate government, Taft-Hartley, healthcare, education, and other non-profit DC plans. In total, 421 DC plans responded, a 3 percent response rate.  The respondents are mainly corporations offering 401(k) plans (60 percent).  Under half of respondents (44 percent) have less that $250 million in assets and 63 percent have between 100 and 5,000 plan participants.

ABOUT THE REPORT SPONSORS

The report was made possible with the financial support of:

• Calvert Investments (benefactor sponsor);
• Neuberger Berman (lead sponsor); and
• TIAA-CREF (lead sponsor).

ABOUT THE REPORT AUTHORS

US SIF Foundation, a nonprofit 501(c)(3) organization, supports the educational and research activities of US SIF:  The Forum for Sustainable and Responsible Investment (US SIF).  US SIF is the US membership association for professionals, firms, institutions and organizations engaged in sustainable and responsible investing (SRI). US SIF and its members advance investment practices that consider environmental, social and corporate governance criteria to generate long-term competitive financial returns and positive societal impact. US SIF's members include investment management and advisory firms, mutual fund companies, research firms, financial planners and advisors, broker-dealers, banks, credit unions, community development organizations, non-profit associations, and pension funds, foundations and other asset owners.  For more information, go to http://www.ussif.org or http://www.socialinvest.org on the Web.

Mercer is a global leader in human resource consulting, outsourcing and investment services. Mercer works with clients to solve their most complex benefit and human capital issues by designing, implementing and administering health, retirement and other benefit programs. Mercer's investment services include investment consulting, implemented consulting and multi-manager investment management. Mercer's 20,000 employees are based in more than 40 countries. The company is a wholly owned subsidiary of Marsh & McLennan Companies, Inc., which lists its stock (ticker symbol: MMC) on the New York and Chicago stock exchanges. For more information, visit www.mercer.com.

The full report is available online at http://www.ussif.org/resources/pubs/.

SOURCE US SIF Foundation, Washington, D.C. and Mercer, New York City