“We think there’s going to be a lot of interest,” said Brock Johnson, Morningstar’s Chicago-based president of the retirement and workplace solutions group, referring to the Morningstar ESG Pooled Employer Plan, which he expects will launch in the second quarter or early third quarter.
Mr. Johnson says he’s optimistic based on conversations he and other company executives have been having with advisers, record keepers, asset managers and consultants, all of whom have shown “genuine interest” in the company’s ESG PEP offering.
“Most of the industry is interested in having conversations about this,” he said.
Mr. Johnson is also encouraged by the robust demand for ESG investment options outside of retirement plans, saying that it’s only a matter of time before the appetite for ESG in investment and IRA accounts on the retail side spreads to the institutional side.
“We think that’s going to eventually get to the defined contribution space,” he said. “We’re seeing end users wanting to know more and more about what they’re investing in.”
While the Morningstar ESG PEP offering is geared to small- and medium-sized companies, Mr. Johnson said he anticipates that interest will initially come from “younger companies that have younger employees in certain industries like technology and environmental services.”
The Morningstar PEP will have an investment lineup consisting of ESG-focused funds across all asset classes, including a target-date fund leveraging all the investments in the plan. The objective is to create “as complete of an ESG lineup as possible,” Mr. Johnson said.
The executives behind Transamerica’s offering — The Sustainable Futures ESG Group Plan Solution — are also bullish on future demand for ESG investments in retirement plans. The plan is provided in partnership with FuturePlan by Ascensus, the third-party administrator; Natixis Investment Managers LLC as the provider of the Natixis Sustainable Future Funds target-date series; and LeafHouse Financial Advisors LLC as the 3(38) fiduciary investment manager.
“I think there’s a place in the marketplace for this kind of program. People invest for lots of different reasons and clearly this is an area of focus for many today,” said Deborah Rubin, Transamerica’s Baltimore-based vice president and managing director of TPA services and special markets.
Jim Dolan, Natixis’ Boston-based senior vice president of retirement strategic accounts, is touting research that suggests that adding ESG investment options can be an incentive to boost plan participation. In a survey of 1,000 workers conducted in January and February of 2019, Natixis found that 61% of workers would participate more actively in their workplace retirement plans if they knew their investments were doing social good.
“We have recognized that employees are willing to start contributing or start to contribute more to their 401(k) if they feel there’s some connection to the …….