Employees are increasingly bringing their passion for causes into the workplace
Sept. 7 marked the annual celebration of National 401(k )Day in the United States. It’s a day, I’m sure, that ranks just behind Memorial Day, Labor Day and the Fourth of July in American popularity. But there is no better time than this "Day" to talk about the growing disconnect between employer and employees when it comes to providing social impact funds in their 401(k) plan.
A study released earlier this year by Povaddo found that most employees who work at Fortune 1,000 companies believe it’s important for a company to align its retirement funds with its social and environmental commitments. This number was even higher among millennials and women — two-thirds of these two groups believe that this alignment is important.
According to a report issued at the end of March, 401(k) plans held an estimated $5.3 trillion in assets and represented 19 percent of the $28 trillion in U.S. retirement assets, which includes employer-sponsored retirement plans — defined benefit (DB) and defined contribution (DC) plans with private- and public-sector employers, individual retirement accounts (IRAs) and annuities. Yet, less than 1 percent of 401(k) plans offer some type of socially responsible fund. According to an Investment News article — in 2017, 401(k) investors committed more than $35 billion in impact investment funds. While this was up more than 58 percent in the previous year, it is still a drop in the bucket.
At the same time, numerous studies have found that millennials are using their dollars to make social impact investments — investments that provide a market financial return and have a positive social impact. And, they are coming into money. In the coming years, baby boomers will pass on trillions of dollars in the largest intergenerational wealth transfer ever. It's estimated that by 2020, millennials already will control $24 trillion — and that's just the beginning. And, according to the same Povaddo study, nearly two-thirds of millennials said they would be more likely to invest in their 401(k) plan if some type of socially responsible funds were offered in their retirement plan.
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