ESG Options in 401K plans could lead to higher contribution rates according to Schroders survey

According to the Schroders 2021 US Retirement Survey, 37% of defined contribution plan (DC) participants said they are offered ESG-related investment options by their employer, while 40% said they did not know.

Of those who were aware of their ESG options, 9 out of 10 said they invest in them.

Further, of those who said their DC plan did not offer ESG investment options or did not know, 69% said they would or might increase their overall contribution rate if offered ESG options. Only 31% said they would not.

“Offering plan participants ESG investment options would not only appeal to purpose-minded investors, but it could also help to motivate some participants to save more toward their retirement,” said Deb Boyden, Head of US Defined Contribution at Schroders. “Surprisingly, four-in-ten participants didn’t know if their plan offered any ESG options, which indicates the need for greater plan communications because once investors know they have the option, they seem eager to invest.”

“Despite regulatory overhang, demand for sustainable investment retirement options continues to rise,” said Sarah Bratton Hughes, Head of Sustainability, North America at Schroders.  “Looking ahead, taking ESG adoption from ambition to action will require a greater emphasis on education by plan sponsors, so participants understand the purpose of ESG and how sustainable investments can be used to build retirement savings.”  

Impact of COVID-19 on DC Participants

During the COVID-19 crisis in 2020, 33% of plan participants said they increased their contribution rate, while 10% said they decreased it; 57% left their contribution rate unchanged.

Almost three-in-four (74%) plan participants said the COVID-19 crisis will have no impact on when they plan to retire; while 17% said they plan to retire earlier and 9% said they plan to retire later.

Other Survey Findings Among DC Plan Participants

• Plan participant respondents said their retirement age goal was 63 on average compared to 65 among those without a plan.
• Asked how confident they were in their ability to smartly invest their assets in retirement, 42% of plan participants said they were “very confident” compared to 18% without a DC plan.
• 4-in-10 plan participants feel their retirement plan is fully on track; just 14% without a DC plan say the same.
• Plan participants are in growth mode: 50% said “grow my assets” was their primary investment objective compared to 21% without a DC plan who were far more likely (56%) to say their objective was generate steady income.

About the Survey

The Schroders U.S. Retirement survey was conducted by 8 Acre Perspective nationwide among 1,000 U.S. consumers ages 45 –75 from January 20— 27, 2021. Respondents were fairly evenly split by age and gender; age: 45-59 (367), 60-69 (348), and 70+ (285); male (501), female (499). The survey included 230 working respondents with employer-provided defined contribution retirement plans.

For further information, please contact:

Jennifer Manser O’Rourke, Head of Corporate Communications, North America
212-632-2947, Jennifer.Manser@schroders.com

River Communications

Joe Collins, 914-686-5599, jcollins@riverinc.com

Note to Editors

Schroders plc

As a global investment manager, we actively and responsibly manage investments for a wide range of institutions and individuals, to help them meet their financial goals and prepare for the future. The world is forever changing, and with our clients at the center of everything we do, we understand the need to continue to adapt and evolve our business in line with what matters most to our clients today, and in the future.

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Further information about Schroders can be found at www.schroders.com/us.

Important Information:

All investments involve risk, including the loss of principal.  Diversification cannot ensure profits or abate all risk.  The views and opinions stated are those of the individuals quoted and are subject to change.  This document does not purport to provide investment advice and the information contained is for informational purposes and not to engage in any trading activities.  The material is not intended to provide, and should not be relied on for accounting, legal or tax advice, or investment recommendations.    Schroder Investment Management North America Inc. (“SIMNA”) is an SEC registered investment adviser providing asset management products and services to clients in the US and Canada. Schroder Fund Advisors LLC (“SFA”) is a wholly-owned subsidiary of SIMNA Inc. and is registered as a limited purpose broker-dealer with FINRA and markets certain investment vehicles for which SIMNA Inc. is an investment adviser.  SIMNA Inc. and SFA are indirect wholly-owned subsidiaries of Schroders plc, a UK public company with shares listed on the London Stock Exchange. Further information about Schroders can be found at www.schroders.com/us or by calling (212) 641-3800. 

*as of December 31, 2020