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Ret plan investments - social


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Key Issues for Fiduciaries When Investing for a Cause
"Millennials ... are interested in more than pursuing social policy goals through their investments; they are also greatly interested in the growth of their 401(k) balances and retirement security, having entered the job during the Great Recession. And that is where we see convergence between plan participants and the DOL guidance: plan sponsors and fiduciaries absolutely have to keep their eye on retirement income." (Bloomberg BNA)
DOL Guidance Impacts Consideration of ESG Factors in Investment Decisions and Shareholder Engagement
"In response to FAB 2018-01, fiduciaries may wish to: [1] review their investment policies and practices (or investment manager contracts, as relevant) to ensure the fiduciary's consideration of ESG factors is tied to economic factors over an appropriate time horizon, and that such decision-making is well documented; [2] review their shareholder engagement policies to ensure the decision to engage will enhance the value of investments, after considering costs, and that the decision is well documented; and [3] review their proxy voting policies to document academic research findings that connect the proxy voting issue ... with economic value." (Reinhart Boerner Van Deuren s.c.)
New Jersey Pension Investments Guided by Social, Environmental Values
"The State Investment Council has withdrawn investments from a company that manufactures high-powered firearms, pressured two private-equity firms not to foreclose on Puerto Ricans displaced by Hurricane Maria last year, and urged Target not to do business with trucking companies that classify their drivers as contractors rather than employees.... [T]he investment council now is working on a formal policy on ... considering environmental, social and governance factors in deciding where to put pension investments." (NorthJersey.com)
Selecting Socially Responsible Retirement Plan Investments
"Although prior guidance allowed an ESG factor to be an integral part of the economic analysis when considering an investment option and to serve as a tie-breaker, the FAB now walks this back and provides that using an ESG factor would only be appropriate if the ESG factor could be treated as an economic consideration by itself, meaning that a qualified investment professional would treat the factor as an economic consideration under generally accepted investment theories." (Fulcrum Partners LLC)
Advisors Still Skeptical About ESG Investment Performance
"Cerulli's analysis of the ESG market reveals that products (mutual funds and exchange-traded funds) deemed 'ESG Integration' (excludes negative screening, impact investing and thematic products) accounted for less than 0.5% of the total market as of the third quarter of 2017.... The findings confirm that one of the biggest hurdles for advisors in turning interest into actual investment, both by users of ESG and nonusers, is the perceived impact on investment performance." (National Association of Plan Advisors [NAPA])
[Guidance Overview] Socially Responsible Investing: What Retirement Plan Sponsors Need to Know
"The new guidance notes that DOL policy does not require fiduciaries to include ESG considerations in investment policies, develop ESG-specific policy statements or guidelines, or incorporate ESG-related tools, metrics or analyses into risk/return analyses. While the bulletin does not prohibit these actions, it does warn that fiduciaries 'must disregard' routine compliance with ESG-related investment policy statements if it would be imprudent, as it relates to participants' retirement income interests, to comply." (Cammack Retirement Group)
Socially Responsible Investing: What Plan Sponsors Need to Know
"While investing in companies that are socially and environmentally conscious is not a consideration for all active and passive investment strategies, for those retirement plan sponsors that try to match the moral and ethical expectations of their plan participants, the way in which they approach ESG-focused investment strategies can be a point of confusion." (Cammack Retirement Group)
ESG's 'Good Vibrations'? Not Yet for DC Plans
"[T]he number of signatories to the U.N.-backed Principles for Responsible Investment swelled from fewer than 100 in 2006 to over 1,800 in 2017, with a comparable increase in assets under management... Despite this growth in interest in the institutional investing industry, ... [only] 16% of DC plans offer a dedicated ESG option.... Only 5% of corporate DC plans offer a standalone option, compared to the 43% of public and non-profit plans that do so." (Callan)
Social Investing: What the Latest DOL Guidance Means for Plan Fiduciaries
"First, fiduciaries cannot accept lower investment returns or higher risks for participants in order to serve social policy goals. Second, fiduciaries can use factors such as environmental, social and governance (ESG) considerations to 'break ties' between otherwise-equivalent alternatives.... [FAB 2018-01] does not discourage the use of social considerations entirely. To the contrary, it provides helpful insight as to ESG investments in 401(k) and other participant-directed plans." (Drinker Biddle)
GAO Report: Retirement Plan Investing -- Clearer Information on Consideration of Environmental Social and Governance Factors Would Be Helpful
"GAO examined: [1] the use of ESG factors by U.S. retirement plans, [2] the use of ESG factors by selected retirement plans in other countries, and [3] DOL's guidance on the use of ESG factors by private sector U.S. retirement plans.... GAO is making two recommendations to DOL, including that DOL clarify whether the liability protection offered to qualifying default investment options allows use of ESG factors." [GAO-18-398, May 22, 2018] (U.S. Government Accountability Office [GAO])
[Guidance Overview] Are ESG Investments Part of Your Plan?
"[D]ecisions regarding using an ESG fund as a QDIA (qualified default investment alternative) were distinguished as not analogous to merely offering participants an additional investment option. A plan sponsor would violate its fiduciary responsibility if it could not show that the fund as a default investment does not create a conflict of interest, and that the fund does not offer lower expected rate of return or higher risk than a non-ESG alternative." (Graydon)
[Guidance Overview] DOL Issues Guidance on Use of ESG Factors for Plan Investments and for Plan Exercise of Shareholder Rights
"[FAB 2018-01] clarifies that ... prior guidance should not be read to suggest that an investment's promotion of ESG factors or positive market trends means that the investment is automatically a prudent investment choice.... A plan should not routinely spend significant assets to initiate or actively sponsor proxy battles, initiate shareholder meetings or fund campaigns on shareholder resolutions." (Mayer Brown)
[Guidance Overview] ESG Factors: Perspectives on the OECD and New U.S. Guidance
"DOL appears to be signaling that, as a matter of enforcement, it will require additional documentation regarding the economic value of significant expenditures of plan assets for shareholder activism. Left unsaid is whether this question of 'value for money' could be a relevant question in selecting defined contribution plan line-ups to include ESG-themed funds as well." (Groom Law Group)
[Guidance Overview] The DOL Again Weighs in on Social Investing
"[T]he DOL has taken the position that consideration of ESG-type factors should be rare, later indicated that such factors can be used as tie-breakers, and most recently noted that such factors should be considered where there is a direct relationship to an investment's economic merits. [FAB 2018-01] strikes a cautionary tone." (Winston & Strawn LLP)
'Do Good' Investing by Retirement Plans to Be Part of New GAO Report
"The report will focus on the use of 'do good' parameters by retirement plans like traditional pensions and 401(k) plans in the U.S. and comparable plans abroad ... Requested by three Democratic congressmen -- Rep. Gerry Connolly (D-Va.), Rep. Jim Langevin (D-R.I.), and Sen. Brian Schatz (D-Hawaii) -- the report likely will be published in May ... Its release coincides with recent investment guidance by the [DOL] that clarified guidance issued under the Obama administration." (Bloomberg BNA)
[Guidance Overview] DOL Warns About Socially Responsible Investing and Shareholder Activism
"Any proxy voting or shareholder engagement policies approved by plan fiduciaries should be intended to enhance the economic return of investments and take into account the costs of exercising shareholder rights. Where plan fiduciaries are considering courses of actions that may involve routine or substantial costs in voting proxies that take into account social factors, fiduciaries should be able to demonstrate that they have analyzed the economic benefit in view of the costs to the plan and that they are not using plan assets to promote public policy preferences." (Kilpatrick Townsend)
[Guidance Overview] DOL Issues More Guidance on ESG Investments, Shareholder Activities
"[F]iduciaries may wish to review their process for determining whether and to what extent ESG factors are economic factors affecting the plan's investment choices. Similarly, it may make sense for fiduciaries to review how they conduct the cost-benefit analysis for various types of shareholder activities. And, as was the case under the 2015 and 2016 guidance, ERISA fiduciaries should not consider ESG factors based on their 'collateral' social impact (unless such social impact represents a 'tie-breaker' between two otherwise equally prudent investment choices)." (Morgan Lewis)
DOL (Again) Clarifies Standards on Economically Targeted Investments and Shareholder Activities (PDF)
"This guidance reiterates the need for fiduciaries to carefully scrutinize any ETI-related investments -- and to be sure to document their review. They should also take a close look at any expenses connected with shareholder activism that could be viewed as routine or substantial, and prepare to defend the benefits of these actions in light of their costs." (Conduent)
[Guidance Overview] DOL 'Clarifies' Its Guidance on Proxy Voting and Social Investing
"[This] guidance both reflects and channels the ongoing debate ... on whether ERISA fiduciaries should take into account only conventional risk/return factors, or may also consider, or even put a thumb on the scale in favor of, additional factors. In principle, guidance that changes with the occupancy of the White House is hard on the rule of law and hard on the fiduciaries charged with the investment of US private retirement plans. In practice, the absence of enforcement or private litigation on these matters suggests that plan fiduciaries are managing substantially to meet their obligations under ERISA." (Eversheds Sutherland)
[Guidance Overview] DOL and ESG Investing: Evolving Guidance
"[W]hile DOL continues to acknowledge that ETI factors can be a 'tie-breaker,' it cautions plan fiduciaries against converting factors that could be Collateral Benefits into relevant investment return economic factors, such as by concluding that the ESG factors 'promote positive general market trends or industry growth.' Instead, FAB 2018-01 states that fiduciaries must 'not too readily treat ESG factors as economically relevant.' ... DOL hypothesizes that plan participants could have competing views on Collateral Benefits and that a fiduciary could thus violate his or her duty of loyalty by favoring some participants' views over others." (Groom Law Group)
[Guidance Overview] DOL Has More to Say About ESG and Shareholder Rights
"The DOL clarified that Interpretative Bulletin 2016-01 was not intended to suggest that individual plans regularly undertake significant expenses to engage in shareholder activism. Also, investment managers and individual plans should not regularly incur significant plan expenses for activist investment activities[.]" (Seyfarth Shaw LLP)
[Guidance Overview] EBSA Releases Field Assistance Bulletin Clarifying Issues Regarding Proxy Voting, Shareholder Engagement, and Economically Targeted Investments
"[FAB 2018-01] clarifies earlier interpretations set forth in Interpretive Bulletins (IB) 2015-01 and 2016-01. In IB 2015-01, the Department held that fiduciaries may not sacrifice returns or assume greater risks to promote collateral environmental, social, or corporate governance (ESG) policy goals when making investment decisions.... ERISA fiduciaries must always put first the economic interests of the plan in providing retirement benefits. The FAB announced today advises that fiduciaries of ERISA-covered plans must avoid too readily treating ESG issues as being economically relevant to any particular investment choice. It further advises that ERISA does not necessarily require plans to adopt investment policy statements with express guidelines on ESG factors." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
What Exactly Is ESG Investing?
"[Of] the $40.3 trillion of assets under management in the U.S. in 2016, $8.1 trillion was invested in ESG portfolios. That growth represents a 30 percent increase from $6.57 trillion in 2014.... No uniform definition exists, but at its heart, ESG investing is an investment methodology that allows an investor to apply a set of criteria that aligns portfolio investments with the investor's ethical considerations or values.... And since ESG criteria are based upon corporate attributes, they apply to both stocks and bonds issued by a company." (CAPTRUST Financial Advisors)
Millennials Embrace ESG Option in Bloomberg's 401(k) Plan
"Millennials are the largest identifiable group that has elected to participate in the ESG-focused fund in Bloomberg's $2.5 billion U.S. 401(k) plan ... Just under 1% of the plan's total assets are invested in the Parnassus Core Equity Fund, which focuses on socially conscious U.S. large-cap companies." (Pensions & Investments)
Pension Funds Missing Opportunity to Influence Corporate Practices
"[T]he value of pension fund assets around the world rose 13.1 percent last year to $41.3 trillion ... Yet few pensions have taken advantage of their investments in companies to influence stewardship globally ... These large asset managers could introduce their environmental, social and governance beliefs into their investment strategies to affect positive change." (Institutional Investor)
With Sustainable Investing Pledge, Voya Joins Industry ESG Debate
"While some voices have emerged in the last several months arguing that the use of ESG investing programs has growth too political in the U.S.... leaders at Voya say this move is coming at the behest of clients and is simply the right thing to do, financially and otherwise.... Practically speaking, it is of course still unclear whether and to what degree signing the pledge will result in a change in Voya's investing approach." (PLANSPONSOR)
Push Grows to Use Pension Funds to Address Climate Change
"New York Gov. Andrew Cuomo last week proposed a 'roadmap' for divesting the $200 billion New York state pension fund from fossil fuel investments, joining a move to use shareholder clout to reduce greenhouse gas-emissions believed to cause climate change.... CalPERS was a key organizer of a coalition of 225 large investors with $26 trillion in assets launched this month to use 'engagement' or persuasion, rather than divestment, to urge corporations to reduce greenhouse-gas emissions." (Calpensions)
Report Says CalPERS Investments Too Focused on Environmental and Social Activism
"The American Council for Capital Formation (ACCF) said CalPERS board members have overemphasized what are called Environmental, Social and Governance (ESG) investments -- and the sluggish returns on those investments are dragging down the pension fund's bottom line.... The report also questioned the pension board's plans to increase climate-related shareholder proposals from 12 to 17. The report also takes aim at individual board members." (The San Diego Union-Tribune)
[Opinion] Slanted 'Study' on the Role of ESG Falls Completely Apart
"The [The American Council for Capital Formation (ACCF)] report argues that our efforts to engage with companies on policies that can impact their bottom line have harmed returns. The report is dead wrong.... [T]his report cherry picks a thin set of loosely-related facts to subliminally promote an anti-pension ideology." (CalPERS)
ESG Adoption Rates Hold Steady
"In 2017, 37% of fund sponsors incorporated ESG factors into the investment decision-making process, unchanged compared to 2016. Larger funds (greater than $20 billion in assets) and foundations consistently had the highest rate of ESG incorporation (78% and 56% respectively)[.]" (Callan)
Climate Change Defines the Fiduciary (PDF)
"It is now high time for fiduciaries to begin or continue a process to identify and manage both the investment risks and opportunities arising from climate change in accordance with their fiduciary obligations under [ERISA], especially [DOL] Interpretive Bulletin (IB) 2015-01. This process would encompass engaging plan service providers, particularly investment managers, on what steps they are taking to address both the risks and opportunities, recognizing that critical disclosures continue to evolve. This process would also include shareholder engagement with issuers on improved disclosure and transparency regarding climate risks in accordance with IB 2016-01." (Stradley Ronon via Bloomberg BNA Tax Management Planning Journal)
[Official Guidance] Text of IRS Disaster Relief Notice PR-2017-01, for Victims of Hurricane Irma in Puerto Rico
"Victims of Hurricane Irma that took place beginning on Sept. 5, 2017 in parts of Puerto Rico may qualify for tax relief from the [IRS].... Individuals who reside or have a business in the municipalities of Adjuntas, Aguas Buenas, Barranquitas, Bayamón, Camuy, Canóvanas, Carolina, Cataño, Ciales, Comerío, Culebra, Guaynabo, Hatillo, Jayuya, Juncos, Las Piedras, Loiza, Luquillo, Orocovis, Patillas, Quebradillas, Salinas, San Juan, Utuado, Vega Baja, Vieques, and Yauco may qualify for tax relief.... [C]ertain deadlines falling on or after Sept. 5, 2017 and before Jan. 31, 2018, are granted additional time to file through Jan. 31, 2018." (Internal Revenue Service [IRS])
[Official Guidance] Text of IRS Disaster Relief Notice GA-2017-02, for Victims of Hurricane Irma in Georgia
"Victims of Hurricane Irma that took place beginning on Sept. 7, 2017 in Georgia may qualify for tax relief from the [IRS].... Individuals who reside or have a business in any of the 159 counties in Georgia may qualify for tax relief.... [C]ertain deadlines falling on or after Sept. 7, 2017 and before Jan. 31, 2018, are granted additional time to file through Jan. 31, 2018." (Internal Revenue Service [IRS])
[Opinion] Pensions Leaving Workers Behind by Focusing on Messaging, Politics
"[The Council for Institutional Investors (CII)] describes itself as a 'leading voice for effective corporate governance practices for U.S. companies and strong shareowner rights and protections.' But what started off as promoting good governance has transformed into politically motivated environment and social governance, often referred to as ESG. Fiduciary responsibility has taken a back seat.... CII members are staring at an unfunded liability of nearly $4 trillion ... So why do they insist on devoting so much of their time and resources on initiatives that will do nothing to help close that gap?" (Mark A. Bloomfield, American Council for Capital Formation, via Investor's Business Daily)
[Official Guidance] Text of IRS Disaster Relief Notice VI-2017-01, for Victims of Hurricane Irma in U.S. Virgin Islands
"Victims of Hurricane Irma that took place beginning on Sept. 6, 2017 in parts of U.S. Virgin Islands may qualify for tax relief from the [IRS].... Individuals who reside or have a business in the Islands of St. John and St. Thomas may qualify for tax relief.... [C]ertain deadlines falling on or after Sept. 6, 2017 and before Jan. 31, 2018, are granted additional time to file through Jan. 31, 2018." (Internal Revenue Service [IRS])
Adding Sustainable and Responsible Investing Options: A Resource Guide for Defined Contribution Plan Sponsors (PDF)
12 pages. "This step-by-step guide assists plan sponsors considering the addition of a sustainable, responsible and impact investing (SRI) option to a defined contribution retirement plan.... [1] Increase your knowledge of SRI and related performance and fiduciary questions ... [2] Gauge participants' interest in adding an SRI option ... [3] Discuss implementation with your consultant and/or plan administrator ... [4] Choose a fund or funds (and monitor performance) ... [5] Educate participants." (US SIF Foundation)
Thoughts on Data and ESG Investing
"Due to imperfect reporting and inconsistent metrics across industries and companies, investment managers have to 'trust, but verify' the actions of their portfolio companies post-engagement. Some typical ways managers can assess the impact of their engagement is by reviewing internally generated proprietary ESG ratings, target setting (e.g., emission, waste, water usage, etc.), and engagement reporting." (Callan)
Making ESG a Part of Your DC Plans: Sustainability Could Help Plan Participants Reach Their Goals (PDF)
"[Environmental, social, and corporate governance (ESG)] options in a DC plan could make plan participants more successful investors by getting them to contribute earlier or contribute more to their retirement plan.... Just as they do as consumers, plan participants may also want to express their values through their investments and receive the emotional benefits they get from feeling like they are doing something good and impactful with their money.... Rather than discourage normal behavior, therefore, DC plans should encourage it by adding ESG options to their lineups." (Morningstar)
Considerations for ESG Policy Development (PDF)
"At the highest level, investors with policies considered to be effective and broadly supported share some common traits. They have articulated their purpose, priorities, and principles, and integrated these pillars within their investment policies and decision criteria. One key to arriving at this point is the investment of time. Effective ESG policy creation requires a process of stakeholder engagement that includes education about and exploration of the sustainable investing thesis and opportunity set." [Also available: Sample Language for Integrating the Goals of the Paris Climate Agreement into an Investment Policy Statement.] (Cambridge Associates)
Research Finds Investors Seeking Consistent ESG Disclosure
"68 percent of institutional investor respondents say non-financial performance frequently or occasionally played a pivotal role in their decision-making last year, compared to 52 percent the year before. Ninety-two percent of respondents agree or strongly agree that ESG issues have real quantifiable impacts on a company's performance." (Corporate Secretary)
Majority of Asset Owners Say ESG Improves Investment Returns
"Sixty-eight percent of asset owners globally believe the integration of [environmental, social and governance (ESG)] strategies has significantly improved returns, ... 80% reported having some form of [ESG] strategy in their portfolios.... Only 17% of survey respondents reported that more than 50% of their total assets have exposure to ESG factors; 39% said between 25% and 49% of their assets have exposure; and 44% said between 1% and 25%." (Pensions & Investments)
Industry-Wide Shift as Investors Find Sustainable Value Through ESG
"[T]raditional obstacles to environmental, social and governance (ESG) investing are fading, while one significant barrier remains: the lack of transparent, standardized and quality data.... [N]early all ... institutional investors surveyed want companies to explicitly identify ESG factors that materially affect performance, while 60 percent note a lack of industry standards for measuring ESG performance as a significant barrier to full integration." (State Street Corporation)
[Opinion] Stupid Public Pension Trends: Divestment Expands
"Once the California politicians are done going through removing all the deplorables from being considered from pension investments, they'll be left with some artisanal gluten-free bread company in Vancouver.... [P]oliticians have no fiduciary duty to the pension funds.... In some of these cases, the 'dirty' investments should not be invested in, because the financial outlook is bad. But in some of the cases the depth of analysis seems to be 'we think this stuff is bad, so obviously it can't keep making money.' " (STUMP)
Millennials Could Drive More ESG Investing
"Overall slightly more than half (51%) of Millennials say they view ESG/impact investing ideas favorably, while just 37% of Gen Xers and 32% of Baby Boomers agree. Millennials are also far and away the most likely to say their investments' impact on society and the environment should be among the most important and primary considerations when building portfolios." (PLANSPONSOR)
[Guidance Overview] New Guidance Restores 1994 ERISA Proxy Voting Interpretation
"IB 2016-1 states that if a fiduciary concludes that there is a reasonable expectation that shareholder engagement on ESG issues is likely to enhance shareholder value, after taking the costs involved into account, a fiduciary can, consistent with under ERISA, take into account ESG impacts in proxy voting and shareholder engagement.... The DOL also sought to lower the threshold for shareholder engagement activities, by changing the standard from the plan fiduciary having a reasonable expectation that such activities 'will enhance the economic value of the plan's investment' to 'is likely to enhance the value of the plan's investment,' restoring the original language of IB 94-2." (Morgan Lewis)
[Guidance Overview] DOL Clarifies Proxy Voting Interpretation, Considers ESG Investments
"Consistent with other recent guidance, IB 2016-1 further provides that a statement of investment policy can include policies concerning economically targeted investments or incorporating environmental, social, or governance (ESG) factors. IB 2016-1 states that if a fiduciary concludes that there is a reasonable expectation that shareholder engagement on ESG issues is likely to enhance shareholder value (after taking the costs involved into account), a fiduciary can -- consistent with ERISA -- take into account ESG impacts in proxy voting and shareholder engagement." (Morgan Lewis)
[Guidance Overview] DOL Clarifies Fiduciary Standards on Proxy Voting and Investment Policies (PDF)
"In response to concerns that prior guidance has unduly discouraged fiduciaries from exercising shareholder rights, the DOL issued guidance clarifying fiduciary duties on proxy voting and investment policy statements. The guidance also reiterates DOL's acceptance of applying environmental, social and governance policies to investment strategies. Plan fiduciaries wishing to increase shareholder engagement have room under this guidance to do so." (Conduent)
[Guidance Overview] DOL Issues Interpretive Bulletin 2016-1 on Voting of Proxies on Securities Held in Employee Benefit Plan Investment Portfolios
"According to the DOL, when proxy voting involves high costs or unusual requirements, the plan fiduciary should: [1] Consider whether the plan's vote, either by itself or together with the votes of other shareholders, is expected to have an effect on the value of the plan's investment that warrants the additional cost of voting. [2] When deciding whether to purchase shares, consider whether the difficulty and expense in voting the shares is reflected in their market price." (Practical Law Company)
[Guidance Overview] DOL Revisits, Relaxes Retirement Plan Proxy Voting Guidance
"[T]he pendulum appears to have swung back in a direction of greater flexibility for fiduciaries that may want to consider investment factors other than pure return on investment; flexibility not only in the selecting of investments, but in using the power of their proxies." (Ascensus)
[Guidance Overview] DOL Reinstates Modified Version of 1994 Guidance on Exercise of Shareholder Rights, Including Proxy Voting
"While the 2008 guidance was intended to update and clarify the 1994 guidance, the changes have -- in the DOL's view -- 'been misunderstood' ... According to the DOL, some have read the 2008 guidance to prohibit ERISA plans from exercising shareholder rights, including voting of proxies, unless the plan performed a cost-benefit analysis and concluded that the particular action was more likely than not to increase the value of the plan's investment.... By reinstating a modified version of the 1994 guidance, the DOL seeks to correct misperceptions about its position and encourage the exercise of shareholder rights." (Thomson Reuters / EBIA)
Change in Fiduciary Rules to Encourage Social Investing by Pension Funds Sought at OECD (PDF)
"[At] the December meeting of the OECD WPPP, a new paper supporting the enhanced use of ESG factors ... questions whether the traditional fiduciary rule ... is too 'narrow' and hindering the application of ESG factors in investing, and therefore should be modified ... Indications are that the proponents of ESG investing will continue to try to push for pension funds to invest based on ESG factors[.]" (Groom Law Group)
ESG Investing in 2017: Three Things to Know
"[1] An increasing number of scoring, indexes and rating systems are emerging to support a growing [environmental, social and corporate governance (ESG)] values and belief system.... [2] ESG related investments offer competitive returns ... [3] Investors born in the 1980s and 1990s are among the most active investors in ESG trends at 93 percent. That compares with 68 percent of Gen Xers and 51 percent of baby boomers who say that social or environmental impact is important when making investment decisions[.]" (InsuranceNewsNet.com)
EU Workplace Pensions Now Required to Incorporate ESG Issues
"The new pensions directive stipulates that: ESG criteria [are] to be considered in investment decisions and their practical implementation should be disclosed in regular reports.... The integration of ESG considerations will not be considered as conflicting with fund managers' fiduciary duties." (Latham & Watkins)
Impact Investing: What Role for Defined Contribution Plans? (PDF)
"Impact investments can be viewed as an offshoot of socially responsible investing (SRI) and have the stated intent of delivering measurable social impact, as opposed to the traditional SRI approach of avoiding and selling out of businesses that negatively impact the social good.... [W]hile impact investing is a trend that deserves continued close monitoring -- with some estimating the potential for it to be a trillion dollar market by 2020 -- there are meaningful barriers that are limiting its role within ERISA defined contribution plans." (Prudential)
Investors Unsure of ESG Benefits
"[In a survey of] 90 U.S. institutional asset owners, wealth managers and defined benefit consultants ... 30% said environmental, social and governance factors drive alpha, while 37% said they do not, and the remaining 33% said they are unsure.... 33% of respondents said ESG investing helps mitigate portfolio risk, while 40% said it does not and 28% said they are not sure.... [O]nly 17% of investors are satisfied with the quality and amount of ESG information provided by companies." (Pensions & Investments)
New Developments in Social Investing by Public Pensions
"Public pension funds continue to engage in social investing, most recently divesting from Iran and fossil fuels. However, social investing is often not effective, as other investors step in to buy divested stocks. Social investing can also produce lower investment returns, conflict with the views of beneficiaries and taxpayers, and interfere with federal policy. In short, public pension funds should not engage in social investing." (Center for Retirement Research at Boston College)
Why Socially Responsible Investing Is Now Important for Your 401(k)
"Recently Morningstar ... introduced Sustainability Ratings to gauge an investment's adherence to [socially responsible investment (SRI)] principles.... A recent U.S. Trust survey found SRI factors are important to 93% of millennials when making an investment decision. Your 401k plan can have greater value to your employees if you begin sharing Morningstar's Sustainability Ratings for your 401k investment options." (Lawton Retirement Plan Consultants)
Pension Plan Assets Fall as Payouts Rise
"Corporate pension plans in North America continued making large lump-sum payouts last year, helping push the total assets of the world's largest 300 pension plans down 3.4% in 2015, according to research by Willis Towers Watson. The decrease was the first in five years for the 300 plans, whose assets had steadily grown since the recession. The drop compares to an increase of the same amount -- 3.4% -- in 2014. The 300 private, public and sovereign pension funds hold a total of $14.8 trillion in assets, with about $6.5 trillion of that in North America." (The Wall Street Journal; subscription may be required)
OECD Focus on Pensions: ESOPs Acknowledged, Social Investing Promoted (PDF)
"The Organisation for Economic Cooperation and Development (OECD) Working Party on Private Pensions (WPPP) ... [final version of] its Core Principles of Private Pension Regulation... added, following comments by numerous US and European stakeholders, acknowledgement of US-style ESOPs.... This [article focuses] on the new ESOP provisions in the Core Principles, the beginning of apparent advocacy of ESG investing by pension funds, and a few of the other areas that are beginning to attract the attention of the WPPP." (Groom Law Group)
The Continuing Battle Over Economically Targeted Investments
18 pages. "As a matter of statutory interpretation, IB 2015-01, like its predecessors, is unpersuasive. [ERISA] requires plan trustees to invest 'solely' to provide participants' retirement benefits. A trustee who invests in ETIs violates this statutory obligation by pursuing collateral economic benefits for persons other than plan participants. As a matter of policy, the social investing which ETIs exemplify is unsound. At best, such social investing in practice merely shuffles investment ownership without altering market-based allocations of capital." (Prof. Edward Zelinsky, via SSRN)
 
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