June 30, 2007
Seeing Retirement Investment Through Green-colored Glasses
by Anne Moore Odell
A new report shows that Americans have more SRI retirement choices than ever before, but it remains
to be seen if people chose to put their savings in socially and environmentally screened funds.
Unless you've looked at your retirement contribution plan carefully, you might have missed the
opportunity to invest in a socially responsible fund.
A new report from Mercer Investment Consulting prepared for the
Social Investment Forum (SIF) shows that
one out of five workers already have a socially responsible option as part of their defined
contribution (DC) plans. The report also says that the number of retirement plans offering screened
funds is on the rise.
In addition, Mercer released a new resource guide for DC plan
sponsors of companies that are interested in adding an SRI option to their retirement plans.
entitled "Defined Contribution Plans and Socially Responsible Investing in the United States,"
states that 19% of defined contribution plans surveyed now include a SRI option. Moreover, 41% of
all plan sponsors surveyed that aren't presently offering SRI options are planning to within the
next three years. Mercer's research was based on a questionnaire answered by plan sponsors,
administrators, and consultants.
"Socially responsible retirement options are becoming a
fixture of corporate America's retirement plans," said SIF CEO Lisa Woll. "This is good news for
investors and their employers. More and more Americans are interested in SRI funds because they
offer a way to save for retirement, improve corporate responsibility, and achieve significant
environmental and social goals. Companies that offer them are providing a real benefit to their
employees," she added.
According to the report, the demand for SRI retirement options is
rising. One reason is because more businesses are aligning their retirement plans with their
missions and SRI options reflect their corporate responsibility goals. Employees are also asking
for companies to include SRI choices. Currently, health care and government organizations top the
businesses inclined to add an SRI option.
"The survey results and anecdotal evidence
points to a trend of seeing a retirement plan as an extension of an organization's mission and/or
commitment to social responsibility," said Craig Metrick, US lead for Responsible Investment,
Mercer Investment Consulting.
"In addition, there is increasing public concern around
climate change and other environmental, social and governance issues in the press, and increasing
evidence that SRI options do not underperform or conflict with fiduciary duty," Metrick concluded.
He also noted that he has seen a marked increase in requests specifically for environmentally
friendly options for DC plans.
Dave Stangis, Director of Corporate Responsibility at Intel, has followed the rise of SRI retirement
options and took part in the news conference with the release of the report. He told
SocialFunds.com, "What the report does is shed light on what is happening. It is clearly a trend
that employees are interested in and this report is the first time we've seen it called out in a
SRI fund performance is assessed using the same criteria as non-SRI funds the
report found. Plan sponsors and advisors use, for example, past performance, and fund volatility to
evaluate SRI funds. The funds' positive and exclusionary screens are also considered one of the
most important factors for fund evaluation.
Actively managed domestic large-cap equity SRI
mutual funds are the most demanded by plan sponsors. Most surveyed said that asset
allocation/lifecycle mutual funds are the most appealing and appropriate socially responsible
Yet misconceptions about the financial track records of SRI funds still exist among
some plan sponsors. SIF sees the growing interest in SRI as an opportunity to help educate
companies, employees, and plan sponsors about SRI.
To help companies, sponsors, and
advisors better understand SRI retirement investing, SIF charged Mercer to create a resource guide
directed toward plan sponsors that outlines how to include an SRI option in their retirement plan.
The guide clearly lays out six steps to adding an SRI option: Step #1: Gauge interest in adding an
SRI option; Step #2: Increase your knowledge of SRI; Step #3: Check with your consultant and/or
plan administrator: Step #4: Make the case: Addressing performance and fiduciary concerns; Step #5:
Choose a fund (and monitor performance; and Step #6: Educate participants.
response to Intel's offering of SRI options in the retirement plans has been very positive, Stangis
told SocialFunds.com the actual number of employees signed up for the SRI options is very small.
Of the roughly 50,000 participants in Intel's DC plans, only 1,000 participants have chosen the SRI
The reasons why Intel's employees haven't picked the SRI choices are varied
Stangis explained. When Intel restructured their retirement plans several years ago, adding Calvert
Equity and Calvert Bond as the SRI choices, they also added many different funds, upping their
retirement choices to more than 70 funds. "The uptake is that people don't go in and change their
fund allocation that often," Stangis said. "People want the choice and people are asking about
socially responsible funds."
The research provided by Mercer for the SIF was undertaken
with the support of project partners: AltruShare Securities, Calvert, FTSE Group, Neuberger Berman,
Northern Trust and TIAA-CREF. SIF, the national association for the social investment industry,
has more than 600 members that include banks, community investing institutions, financial planners,
foundations, mutual fund companies, and research companies.