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OneDigital Advisers Discuss ESG Investment Options Within DC Plans

Recent data from The Vanguard Group in 2021 shows that 6% of participants offered ESG funds used them.

In recent years, there has been a significant push to include alternative investments or investments with Environmental Social Governance (ESG) distinction in investment lineups within defined contribution retirement plans. To be included in investment lineups, ESG funds must be evaluated first from a financial standpoint, and then they may be evaluated from an ESG standpoint. OneDigital Retirement and Wealth’s Vice President Mark Beaton recently had a retirement plan client that was offering way too many ESG investments within their organization’s 403(b) plan. The non-profit that he was advising was offering 14 ESG investment options. Mark warned his client that “this might be a lot of overload.”

In the end, the client settled for offering the workforce two large ESG blend funds, a decision that the client now realizes made more sense.
— Mark Beaton, Vice President, OneDigital Retirement + Wealth

This scenario with the 403(b) client is not out of the ordinary. Joe DeBello, a Managing Consulting with OneDigital Retirement + Wealth, goes into detail about the feedback he has received from other retirement plan sponsors.

I have received feedback from employers that their ESG funds have had little if any uptake from participants and relates to their frustration. After going through the effort of evaluating ESG investment options, it's leaving sponsors with an "is-it-worth-it type feeling.”
— Joe DeBello, Managing Consultant, OneDigital Retirement + Wealth

This lack of participation from plan participants is starting to make employers feel that adding ESG funds into the plan lineup is more work than beneficial to the plan's overall health. Having alternatives for employees to choose from is well received, but the numbers prove that the adoption and participation of these funds are not where it needs to be.

To read the full Pensions & Investments article click here.

Want to read more from OneDigital Retirement + Wealth? Check out this recent article: Putting the Markets Into Perspective.

Environmental, Social, and Governance ("ESG") securities are subject to risks associated with their underlying investments' asset classes.

Investment advice offered through OneDigital Investment Advisors, an SEC-registered investment adviser and wholly owned subsidiary of OneDigital.