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Are your company’s 401(k) investments environmentally and socially friendly?  Wait, you can do that?

Are your company’s 401(k) investments environmentally and socially friendly?  Wait, you can do that?

| February 15, 2018
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Are your company’s 401(k) investments environmentally and socially friendly?  Wait, you can do that?

Awesome, so you’ve got a 401(k)/403(b) retirement plan set up or you’re thinking about setting one up.  You’re happy with how the thing is running, right?  Seems like everything is in place - your employees are stoked they have a plan to contribute to for their retirement, the record keeper and/or TPA is doing their part in helping the HR team on the administration and reporting, plan fees are competitive and the fund selection is in great shape and is being screened every quarter as part of your due diligence process as a fiduciary.  Chances are, you’d be reluctant to change anything unless your retirement plan advisor said you needed to.

Well, here’s where I tell you: “It may be time to make a POSITIVE change to your plan”.

I’m passionate about what I do.  I love working with business owners through the retirement plan puzzle to make sure every piece fits together.  But something I’m equally passionate about is the ocean.  The environment.  My community.  My neighbors.  My friends.  I want to see them all succeed; thrive actually.

Most people will agree that seeing cigarette butts in the sand at Cardiff reef or trash on the sidewalk in San Clemente sucks.  Like, really sucks.  It irks me to hear that radioactive nuclear waste could be leaking onto our beaches and into the water or that an oil refinery is producing toxic chemicals next to our kids' schools.  Honestly, it’s ridiculous.

But you guys/gals. . .  We can make headway and tackle some of these issues through something people don’t really think about - your company’s retirement plan.

You probably know that inside 401(k), 403(b) and other types of employer sponsored plans, there are mutual funds that are comprised of various stocks, bonds and other investments.  But you should also know there are some mutual funds that are available in certain retirement plans that focus on being environmentally and socially responsible (SRI).

Wait, so you mean we can invest in our company 401(k) and be socially responsible at the same time?  


Evaluating a business to invest in on the criteria of Environmental, Social and Governance (ESG) isn’t something that’s necessarily new.  In fact, ESG investing has grown by 97% in the last 20 years1.  And we’re not only talking about the environment and business's corporate structure, folks.  These ESG screens can also exclude investing in companies that have a hand in animal abuse, weapons, alcohol, tobacco, gambling, nuclear power or having business dealings 3 in certain countries.

As more and more people become aware of what their effect is on the world, they are looking to buy from and invest in companies that are taking proactive measures to minimize their overall footprint and maximize their positive impact.

To give you an example, a 2015 study was conducted to find out what the general investing population thought about this kind of thing.  Not surprisingly, of the 800 individual investors that were surveyed, 71% of them expressed interest in SRI.  Whats more is that 84% of millennials were interested in SRI and 74% of the respondents would like to see more SRI in their retirement plan offering4.

What about investment performance?

A lot of people I talk to are surprised to hear that investing in companies who adopt sustainability principles meet and often exceed the performance of traditional investments2.   Moreover, SRI indexes have similar risk profiles to their broad market counterparts2.  So, what does that mean?  It means that all in all, statistics show investing in a SRI index may be similar to investing in the Dow Jones Industrial Average or the S&P 500.

Although costs and prices vary, these funds can be very comparable to your traditional 401(k) investment line-up.

 So, in summary and in a way my wife would like (bullet points), having Socially Responsible Investments in your company retirement plan may produce:

  • a way to help your community and environment
  • forcing ‘good’ change through your plan’s investments
  • similar risk and returns as the traditional, major indexes
  • similar costs to traditional investment choices

If you feel like I do, I’m sure you’ll have a second look at your retirement plan’s investment menu.  Even if you're a young company that is thinking about starting a retirement plan for your employees, I urge you to find an SRI screened fund and consider adding it to your investment menu.   Remember, every retirement plan is and should be different based on your company’s goals and circumstances.  There are so many portfolios and mutual funds out there, that it can be challenging to find the one that fits within YOUR plan’s objectives.  But if you need some guidance on how to find the right mutual fund, asset manager, or if you just have questions about your plan in general, let us know and hopefully we can make a POSITIVE change together.










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