CHAPTER 13
Retirement Accounts: Build Values Into IRAs and Employer Plans
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TAKE ACTION
First, evaluate whether the investments in your retirement accounts align with your values. If you discover that they don’t, consider taking steps to move your assets in that direction. Because moving money within the context of a retirement account doesn’t create tax consequences, these can be the easiest places to begin working to align your investments with your values. Imagine how great it will feel to apply the information in Activate Your Money to these accounts!
Employer Sponsored Plans
STEP 1: LEARN WHERE YOU STAND
Shining Light on 401(k) Plans. See if your company’s plan is included in this site from BrightScope. If it is, learn how the plan rates relative to competitors, how many employees are enrolled, average balances, most popular investment options, and more. There is also a pretty cool tool to show key characteristics of over 30,000 funds.
STEP 3: FAMILIARIZE YOURSELF WITH KEY CONCEPTS
The World Business Council for Sustainable Development (WBCSD) was established in 1995 to help businesses address issues of sustainability. In 2018, the organization released a two-part toolkit to encourage offering responsible retirement account investment options. Although these guides were written for plan administrators, they can be very helpful to employees wishing to change the system from within. They will help you understand retirement plans from the perspective of an administrator and they will provide insight into tactics you can take to speak with the managers of your company’s plan(s).
Aligning Retirement Assets: Toolkit 1. Toolkit 1 answers the question, “What is a responsible retirement plan?” It gives an overview of the goals of a retirement plan and how to think about moving a plan toward sustainable investment.
Aligning Retirement Assets: Toolkit 2. Toolkit 2 offers the managers and sponsors of retirement plans practical advice for implementing responsible, values-aligned methods and considerations.
The Programs & Projects tab on the WBCSD website provides a wealth of valuable information about retirement plans, including this section on Aligning Retirement Assets.
STEP 4: BE PREPARED TO ADDRESS COMMON MYTHS
MYTH: Employees Don’t Care
ESG and Sustainable Investing: Uncovering Motivations, Dispelling Myths. In addition to providing data on employee demand for sustainable investment options, this piece by Natixis Investment Managers debunks more than a dozen myths related to values-aligned investing.
MYTH: Sustainable Funds Underperform
Cornerstone Capital analyzed over 2,200 studies conducted since the 1970s and found consistent support for the conclusion that ESG standards do not compromise investment performance.
Morgan Stanley analyzed more than 10,000 mutual funds over a seven-year period, showing that investing in sustainability met – and often exceeded – the performance of comparable traditional investments. This was true on both on an absolute and a risk-adjusted basis and across all asset classes over the period studied. Follow-on research by Morgan Stanley in 2019 provided further support to these studies.
US|SIF provides links to key studies by Nuveen TIIA Investments, Barclays Research, Cambridge Associates and others. This one-page summary covers studies that range from 2007 to 2019.
The US Impact Investing Alliance pulled together a comprehensive list of resources to demonstrate that sustainable investing leads to equal, if not greater, returns on investment.
More recently, Allianz, BlackRock, Invesco, and Morningstar – all major players in the financial markets – found that ESG investments were outperforming traditional funds through mid-2020 (the time of this writing). A BlackRock study found that 75% of sustainable indexes did better in the market downturns from 2015 through 2018, and that 94% of sustainable index outperformed during the 2020’s first-quarter COVID market drop.
MYTH: Viable Values-Aligned Alternatives Are Hard to Find
The Schwab Socially Conscious Funds List is a comprehensive list of fixed income and public equities funds broken down by type. Among public equities, the list includes funds of different market cap sizes, geographies, and value/growth, as well as target-risk and target-date options.
STEP 6: FIND ANOTHER ADMINISTRATOR
The following firms are available to help integrate values-aligned funds into retirement accounts. Read more about these firms and the services they offer in Chapter 13 of Activate Your Money.
CHAPTER 13
Retirement Accounts: Build Values Into IRAs and Employer Plans
TAKE ACTION
First, evaluate whether the investments in your retirement accounts align with your values. If you discover that they don’t, consider taking steps to move your assets in that direction. Because moving money within the context of a retirement account doesn’t create tax consequences, these can be the easiest places to begin working to align your investments with your values. Imagine how great it will feel to apply the information in Activate Your Money to these accounts!
Employer Sponsored Plans
STEP 1: LEARN WHERE YOU STAND
Shining Light on 401(k) Plans. See if your company’s plan is included in this site from BrightScope. If it is, learn how the plan rates relative to competitors, how many employees are enrolled, average balances, most popular investment options, and more. There is also a pretty cool tool to show key characteristics of over 30,000 funds.
STEP 3: FAMILIARIZE YOURSELF WITH KEY CONCEPTS
The World Business Council for Sustainable Development (WBCSD) was established in 1995 to help businesses address issues of sustainability. In 2018, the organization released a two-part toolkit to encourage offering responsible retirement account investment options. Although these guides were written for plan administrators, they can be very helpful to employees wishing to change the system from within. They will help you understand retirement plans from the perspective of an administrator and they will provide insight into tactics you can take to speak with the managers of your company’s plan(s).
Aligning Retirement Assets: Toolkit 1. Toolkit 1 answers the question, “What is a responsible retirement plan?” It gives an overview of the goals of a retirement plan and how to think about moving a plan toward sustainable investment.
Aligning Retirement Assets: Toolkit 2. Toolkit 2 offers the managers and sponsors of retirement plans practical advice for implementing responsible, values-aligned methods and considerations.
The Programs & Projects tab on the WBCSD website provides a wealth of valuable information about retirement plans, including this section on Aligning Retirement Assets.
STEP 4: BE PREPARED TO ADDRESS COMMON MYTHS
MYTH: Employees Don’t Care
ESG and Sustainable Investing: Uncovering Motivations, Dispelling Myths. In addition to providing data on employee demand for sustainable investment options, this piece by Natixis Investment Managers debunks more than a dozen myths related to values-aligned investing.
MYTH: Sustainable Funds Underperform
Cornerstone Capital analyzed over 2,200 studies conducted since the 1970s and found consistent support for the conclusion that ESG standards do not compromise investment performance.
Morgan Stanley analyzed more than 10,000 mutual funds over a seven-year period, showing that investing in sustainability met – and often exceeded – the performance of comparable traditional investments. This was true on both on an absolute and a risk-adjusted basis and across all asset classes over the period studied. Follow-on research by Morgan Stanley in 2019 provided further support to these studies.
US|SIF provides links to key studies by Nuveen TIIA Investments, Barclays Research, Cambridge Associates and others. This one-page summary covers studies that range from 2007 to 2019.
The US Impact Investing Alliance pulled together a comprehensive list of resources to demonstrate that sustainable investing leads to equal, if not greater, returns on investment.
More recently, Allianz, BlackRock, Invesco, and Morningstar – all major players in the financial markets – found that ESG investments were outperforming traditional funds through mid-2020 (the time of this writing). A BlackRock study found that 75% of sustainable indexes did better in the market downturns from 2015 through 2018, and that 94% of sustainable index outperformed during the 2020’s first-quarter COVID market drop.
MYTH: Viable Values-Aligned Alternatives Are Hard to Find
The Schwab Socially Conscious Funds List is a comprehensive list of fixed income and public equities funds broken down by type. Among public equities, the list includes funds of different market cap sizes, geographies, and value/growth, as well as target-risk and target-date options.
STEP 6: FIND ANOTHER ADMINISTRATOR
The following firms are available to help integrate values-aligned funds into retirement accounts. Read more about these firms and the services they offer in Chapter 13 of Activate Your Money.
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