Interest in socially responsible investing (SRI), also known as environmental, social and governance (ESG), is on the rise, and while it may not yet make up a huge part of investments in defined contribution plans, that may be changing—if not now, in the near future.

A Spectrem Group report pointed out that while some plan participants are strongly committed to including SRI/ESG investments in their portfolios, others are not, and it varies by age group and by sex.

For instance, while slightly more than half—51 percent—say they do not have SRI investments in their portfolios, 30 percent have nearly a quarter—24 percent—of their investments in such offerings. Another 14 percent devote substantially more to SRI: 25–49 percent.

The potential for additional growth is there, considering that as of the end of 2013, more than one out of every six dollars under professional management in the U.S.—$6.57 trillion—was invested in SRI strategies.

That’s according to the US SIF Foundation’s 2014 “Report on Sustainable and Responsible Investing Trends in the United States,” which also said that foundations are boosting “their practice of mission investing—using a variety of strategies to create positive social impact aligned with their mission.”

The report said, “The individuals, institutions, investment companies, money managers and financial institutions that practice SRI seek to achieve long-term competitive financial returns together with positive societal impact. SRI strategies can be applied across asset classes to promote stronger corporate social responsibility, build long-term value for companies and their stakeholders, and foster businesses or introduce products that will yield community and environmental benefits.”

And while institutions may have a substantial influence on the investments within their portfolios, that doesn’t mean that individual plan participants don’t want to move toward SRI/ESG-focused assets.

In fact, Spectrem’s study found that older DC plan participants, in particular, are the ones likely to already have the largest share of their portfolios devoted to SRI: 21 percent of WWII generation households, it said, have devoted 25–49 percent of their portfolios to them.

And women are more likely than men to have at least a quarter to a half of their portfolios in SRI (18 percent compared with 10 percent).

A Cerulli Associates report found that ESG/SRI “came into its own” in 2015, “as the industry began to see more mainstream acceptance.”

Also, research from Calvert Investments found that workers given the choice of SRI within their plans felt better about their employers than those who did not have the option, and:

66 percent of participants in plans offering SRI as an option said they were “highly satisfied,” compared with just 44 percent of those whose employers didn’t provide SRI in the plan, and
81 percent of millennials said they would opt for it, once they understood what it was.

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