Finding Fixed-Income ESG Investments for Retirement Plans

ESG Investments for Fixed Income Retirement Plans

Atlanta, GA: Sustainable investing has become more important to all types of investors in the past few years. And now, many in the retirement plan industry expect plan sponsors will include more environmental, social and governance (ESG) investments in their plans since the Department of Labor (DOL) has issued a proposed rule that is more amenable to ESG investments in retirement plans than regulations issued by the previous administration.

Much of the focus on ESG investing has been on equity investments. However, defined benefit (DB) plan sponsors following a liability-driven investing (LDI) strategy allocate heavily to fixed income, as do defined contribution (DC) participants who are nearing retirement. Other DC plan participants, even those in target-date funds (TDFs), also invest a portion of their accounts in fixed income for diversification.

In a paper, “An Asset Owner’s Guide to Fixed-Income ESG Integration,” Josh Palmer, head of fixed-income ESG research at Willis Towers Watson in London, says one-third of all U.S. assets under professional management now use sustainable investing in their strategies. He notes that fixed-income ESG investments are already on the market, and the number of such funds continues to rise.

He says plan sponsors can look at investment labels and how they are marketed to find options, then do their due diligence to make sure those choices are appropriate. They can also engage with managers that run non-labeled ESG products with the aim of improving their ESG reporting. This will enable them to see how they are integrating ESG factors, if at all.

Palmer explains that fixed-income managers might provide reports with examples of how they’ve been investing sustainably, their sustainability metrics and the average ESG score of their portfolios. In addition, a manager might have separate sustainability targets—such as reducing emissions over time—in creating allocations to investments with real-world impacts. Managers also might have exclusions in place, he adds, and their sustainability scorecards could include a positive screen strategy in addition to excluding bad investments.

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In summary…

To summarize this article, as of 2018, fixed-income investments are becoming more ESG-friendly. However, there should be a focus on risk management and financial performance first, then the application of ESG analysis. It’s advised for DC plan sponsors to enlist the help of an investment consultant to ensure they can incorporate ESG benefits into portfolios in a prudent way. It also states that greenwashing has become an issue and that European officials are developing regulations to protect investors from Greenwashing. As yet in the US, regulations have been light.

Due to a lack of standardization for ESG factors globally, it will continue to be a challenge for investors as the criteria evolve. “ESG factors can improve performance and reduce risk,” he says. “But it is important that the evaluation of ESG investments is done properly, and a consultant can help.”

ESG is starting to move toward the mainstream in fixed-income investments. If you are looking for ESG factor analysis, your 401k plan should be able to help you look into them through an investment consultant.

ESG refers to environmental, social, and governance factors when investing. This article informs readers how fixed-income investments are becoming more ESG-friendly but also highlight the importance of understanding an investment manager or issuer’s process before investing in fixed-income products.

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Finding Fixed-Income ESG Investments for Retirement Plans

ESG: The New Way of Doing Business in Atlanta, GA

Business and organizational sustainability is a complex issue in Atlanta, with many stakeholders and perspectives. It’s also an area where the stakes are high – if we don’t get it right, there will be dire consequences for our communities and the planet.

The good news is that more investors are taking notice of ESG issues when they invest in Atlanta companies and organizations. In fact, over the past decade institutional investors have been increasingly incorporating Environmental, Social and Governance factors into their investment decisions. And soon it will be impossible to win any RFP’s without it.

We want everyone (not just big institutions in Atlanta) to be able to incorporate ESG-related risk into their actions because Companies that don’t adapt to these changes will not survive. This change has many companies in Atlanta scrambling to figure out how they can stay competitive and be profitable while also contributing to a better future.

ESG The Report is one solution that helps businesses in Atlanta find their niche in this new landscape by providing information on risks and opportunities related to environmental, social and governance factors affecting them today. Our report offers insights into what investors are looking for from companies in Atlanta and around the globe.

ESG Frameworks provide investors with insight into how companies are performing in terms of corporate governance, social issues, labour standards and environmental impact. Ask about our ESG Frameworks package to help you get started on making your company, department or organization diverse, equitable and inclusive for all stakeholders.