Women are more likely to invest in environmental, social, and governance funds in their defined contribution plans than men, according to a new issue brief released by the Employee Benefit Research Institute (EBRI) and the National Association of Government Defined Contribution Administrators (NAGDCA). The brief also found significant differences in ESG adoption based on age, tenure, and account balance among public retirement plan participants.
The brief, ESG Investment Options in Public DC Plans, studied the ESG investing habits of more than 32,000 public DC plan participants. Per the brief, while dollar allocations to ESG funds at a plan level were on average 2.7%, EBRI and NAGDCA found an overall ESG adoption rate of 31% among DC plan participants, and an average ESG allocation for ESG-investing participants of 14%.
“We show that women are significantly more likely to invest in ESG funds relative to men,” said EBRI research and development strategist Bridget Bearden in a news release announcing the report. “Older participants, longer tenured and those with higher account balances are less likely to invest than their younger and less well-off counterparts.”
Bearden noted, however, that “despite the general decline in ESG participation rates with age, older workers who do allocate to ESG funds tend to have higher allocations to ESG than their younger peers.”
EBRI is a non-profit organization that provides information relating to U.S.-based employee benefit programs and studies the world of health and retirement benefits, including issues such as 401(k)s, IRAs, retirement income adequacy, consumer-driven benefits, Social Security, tax treatment of retirement and health benefits, cost management, worker and employer attitudes, policy reform proposals, and pension assets and funding.
NAGDCA executive director Matt Petersen added: “This analysis is an important first step in understanding how public sector participants use sustainable investments within retirement plans and provides an opportunity to begin a discussion on how plan sponsors can think about design, governance and engagement to best serve their employees.”
NAGDCA, a professional association for plan administrators and service providers of government-sponsored defined contribution retirement plans, provides education, information, and training in all aspects of public plan administration.
The brief’s analysis is based on data contained in the EBRI-NAGDCA Public Retirement Research Lab database, which contains year-end 2019 data for nearly 200 DC plans; nearly 2.3 million state, county, city, and subdivision government employees; and $113 billion in assets. The Public Retirement Research Lab provides findings that allow plan sponsors, providers, administrators, policymakers, and others to inform better decision making around public retirement plans while also providing a central clearinghouse for data-driven analyses of public DC retirement plans.
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