Defined Contribution Asset Managers to Boost ESG Marketing: Cerulli

By Alex Padalka October 2, 2020

Interest in marketing and distributing environmental, social, and governance investments remains strong among most defined contribution investment-only asset managers — despite a recent proposal from the Department of Labor for more scrutiny of such investments in retirement plans, according to recent reports.

In June, the DOL unveiled a proposal that would force retirement plans to demonstrate that the ESG funds they chose are “economically indistinguishable” from other investments. Critics say the move would put undue barriers on ESG products — in fact, 48% of DCIO asset managers surveyed by Cerulli think the proposal is “one of the most significant barriers to adoption of ESG products in DC plans,” the research firm says. 

What’s more, confusion about ESG investing has also hampered ESG adoption by DC plans, according to Cerulli.

Shawn O'Brien
Nonetheless, these factors aren’t putting the brakes on the marketing and distribution of DC-focused ESG investments, Cerulli says. And 56% of DCIO asset managers plan to increase their marketing and distribution efforts over the next 12 months, according to the research firm. 

“For now, implementing ESG-themed products within a plan’s [qualified default investment alternative] is not a viable option from a fiduciary standpoint. However, DC asset managers relate that some of their plan sponsor clients continue to express interest in ESG investments,” Shawn O’Brien, senior analyst at Cerulli, says in a statement.

Many asset managers see various benefits of ESG funds, according to the survey. Seventy-five percent say the top reason to incorporate ESG criteria in their investment analysis is to mitigate risk, while 68% say they do so because it leads to better alpha opportunities, Cerulli found.

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