Sponsored by Voya Financial
Retirement plan participants save because they’re worried about their future—but that’s not their only concern. They increasingly want investments that align with their values and drive the change they want to see in the world. This is the spirit behind the growing interest in environmental, social and governance (ESG) principles in investments, employee benefits and retirement plans.
Not so long ago, ESG products were considered niche. But investors led by Millennials have begun to demand value from their investments beyond returns. Today, one in four invested dollars takes ESG factors into account.1 In fact, ESG assets could represent half of all professionally managed investments within the next five years.2
Meeting this demand is imperative—for plan sponsors and employers who want to remain competitive. Organizations that prioritize ESG for their employee benefits, retirement plan investment options and as part of a broader workplace culture may stand out as the employer of choice for the next generation. Consider these five ways ESG principles can help your employees and organization.
1. ESG Plans Can Help Improve Employee Engagement and Retention
Involving and retaining employees is essential to business performance and a healthy workplace culture. Incorporating ESG investment options into your retirement plan can help increase engagement and encourage employees to stay with your company. A recent Voya Financial survey showed that 41% of full-time employees are more likely to stay with their employers if their retirement plan includes ESG-focused products.3 In addition, 42% of survey respondents said they were more likely to stay with an employer that applies ESG principles to workplace benefits.4
2. ESG can also boost recruitment efforts
Not only does ESG help retain employees, but it is also a powerful tool for attracting top talent. Investments that consider environmental, social and governance factors have broad appeal. For example, 70% of 401(k) participants are interested in retirement plan options that have a positive impact on ESG issues.5 As mentioned earlier, interest is especially increasing among younger employees. Seventy-five percent of Millennial workers are interested in ESG investing — a 9% increase from 2017.6
3. ESG Options Can Help Boost Retirement Plan Participation
Offering a company-sponsored retirement plan is the first step toward encouraging your employees to save for the future. Next step? Getting as many employees as possible to participate. This is another area where ESG can make a difference. Voya’s survey shows that 76% of respondents would be more likely to enroll in or participate in a workplace retirement plan if it offered ESG investment options.7 Increasing access to ESG investments may encourage those who have not enrolled and may eventually join. But the participation perks don’t stop here. 63 percent of survey respondents said they would recommend a plan that includes ESG options for other employees.8 And once they are enrolled, 60% of employees said they are more likely to engage with plan tools if the plan includes ESG investments.8
4. ESG Helps Participants Save Even More
The ability to align retirement investments with values is a powerful motivator for many plan participants. Apart from improving scheme linkage, ESG investment options can also help in boosting the overall savings rate of the scheme. In fact, 60% of Voya survey respondents said they would potentially contribute more to a plan that values ESG.8
5. ESG Scheme Can Improve Savings And Yield Cost Savings
From a longer perspective, the impact of ESG investment options could increase plan participation not only at the employer level but across the country. More employees who participate in the plan can help improve plan savings, leading to cost reductions that benefit employers and employees. The demand for ESG is also driving the growing number of ESG investment products. An estimated 200 new funds with ESG investment mandate will be commissioned over the next three years.2 The base of support and willingness for ESG bodes well for the entire ecosystem from plan sponsors to investors to employees and ultimately the planet.
Advancing ESG in Retirement Plans
As awareness of environmental, social and governance issues increases, investors and employees seek investment options that reflect their preferences and values. By incorporating ESG into your benefits and retirement planning, you may be best positioned to meet your participant’s needs, enhance your organization’s reputation, and help create a more ethical and sustainable world in the process.
One of the latest advancements in the industry is the introduction of Dalbar’s ESG-certified retirement plan.9 This annual certification process evaluates the plan’s success in applying defined ESG principles more broadly to their retirement planning.
At Voya, we are proud to be the first publicly traded company to receive ESG Retirement Planning Certification from DALBAR – earning five out of five stars for the retirement planning we offer to our employees.
Learn more about Voya’s commitment to ESG here.
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All investments involve the risk of price fluctuations and the uncertainty of the rates of return and yield inherent in the investment. All security transactions involve a substantial risk of loss. Environmental, social and governance (ESG) risk consists of factors that can cause a portfolio to forego certain investment opportunities and/or exposure to certain industries, sectors or sectors.
1. Deloitte, Advancing Environmental, Social and Governance Investing: A Holistic Approach for Investment Management Firms, February 2020
2. Deloitte, Advancing Environmental, Social and Governance Investing: A Holistic Approach for Investment Management Firms, February 2020
3. Voya Participant Experience Survey Report, January 2021
4. Voya Participant Experience Survey Report, January 2021
5. Voya Consumer Insights and Research, 2020
6. Morgan Stanley Institute for Sustainable Investing, Sustainable Signals, July 2020
7. ESG Principles and Certification Report, July 2020
8. Voya Consumer Insights and Research, July 2020
9. Dalbar, Inc. is a leading financial services market research firm that conducts various ratings and evaluations of practices and communications committed to raising the standards of excellence in the financial services and healthcare industries. Dalbar is a separate entity and is not a corporate associate of Voya Financial®. DALBAR ESG certification criteria fall into 3 categories: environmental (paper suppression, automatic enrollment, online capabilities), social (premature withdrawal options, matching contributions, phone center capabilities, pre/post retirement assistance) and governance (reasonable planning fees) , compliance with applicable regulations, sound investment policy, investment reviews, third party requirements). There is an annual fee for ESG scheme certification which is same for all participants in the program and depending on the number of participants in the scheme (<1,000 प्रतिभागी $500 हैं, 1,000 - 10,000 प्रतिभागी $2,500 हैं, >10,000 participants is $5,000). DALBAR ESG certification does not reflect actual customer experiences or results and is not an indication of future performance. Where Voya assisted DALBAR in developing the ESG certification, Voya plays no role in the evaluation process. The fact has been disclosed to the extent that it may be construed as a potential conflict of interest.