How to Incorporate Your Organization's Values Into Your Benefits

Owen Ramsay, Investment analyst

Today people around the country are holding the organizations and businesses they work for, buy from, invest in, and partner with to higher standards. As a result, we are seeing a shift away from profit-centric companies to purpose-driven enterprises looking to use business as a force for good.

B Corps, Benefit Corps, Employee Owned and other companies who embody social consciousness into their missions and values have the growing attention of people looking to align their own values with that of the company’s and create a more sustainable economy.

Why Implement Socially Conscious Investing into your Retirement Plan?

Socially conscious investments have piqued the interest of retirement plan sponsors and participants. Aside from the financial materiality of incorporating sustainability into your investment selection process, offering socially conscious investments can help boost participation and engagement amongst employees.

73% of participants want socially conscious investments within their retirement plan¹
72% of participants say they would save at a higher rate if offered socially conscious investments within their retirement plan¹

American workers have a combined 10.4 trillion dollars in participant-directed, defined contribution plans (401(k)/403(b) plans)². By giving employees the opportunity to align their personal values with investment decisions, individuals can put that hard-earned money towards the positive initiatives they care about. Similarly, organizations and companies can use socially conscious investments as a way to incorporate their employees’ values into the organization’s values.

What is Environmental, Social, and Corporate Governance (ESG)?

Environmental, Social, and Corporate Governance (ESG) is a method of investing in which investors apply key sustainability factors into the investment research and analysis process. The environmental component relates to the conservation of the natural world, the social component is the consideration of people and relationships, and the corporate governance component examines the standards for running a company.

Looking at how companies behave within these three components of sustainability can be very important to the long-term financial success of a company and the identification of material risks.

How do you select the right ESG investments AND meet your fiduciary duty?

First, it’s important to note that ‘socially conscious’ means something different to each person. Lebel & Harriman (L&H) has developed a participant survey designed to identify which of the E, S, and G tenants are most important to your people. Once identified, all investments are screened through our Scoring Methodology as outlined in a plan’s Investment Policy Statement. Once determined to be a prudent investment option, we utilize ESG screens to identify their true impact on the world.

Lebel & Harriman’s ESG screening procedure includes a thorough review of the investment prospectus, utilization of Sustainalytics for sustainability analysis and scoring, and direct communication with investment managers. By utilizing this three-pronged approach, we can identify an investment’s objective, strategy, risks, performance, and ESG impact. Due diligence and ongoing monitoring of funds through our scorecard system and ESG screens work to ensure an investment remains prudent both financially and in its ESG standards.

How can Lebel & Harriman help?

Along with our ESG fund screening capabilities, Lebel & Harriman has developed a process for effectively implementing ESG into retirement plans and communicating it to plan participants. L&H can help educate the investment committee on ESG, develop an ESG philosophy for a plan based off participant survey results or company values, work with service providers to implement that philosophy, and educate participants on ESG investments and the plans offerings.

For more information, contact Owen Ramsay at (207) 773-5390 or oramsay@lebelharriman.com.

Sources

¹MFS 2021 Global Retirement Survey, US respondents. Methodology: Dynata, an independent third-party research provider, conducted a study among Defined Contribution (DC) plan participants in the US on behalf of MFS. MFS was not identified as the sponsor of the study. https://www.mfs.com/content/dam/mfs-enterprise/mfscom/news/MFS-Global-Ret-Survey12162021.pdf

²https://www.ici.org/statistical-report/ret_22_q1

The material contained in this document is for informational purpose only and is not intended to provide specific advice or recommendations for any individual nor does it take into account the particular investment objectives, financial situation or needs of individual investors. The information provided has been derived from sources believed to be reliable but is not guaranteed the accuracy and does not purport to be a complete analysis of the material discussed. This material is not intended to provide and should not be relied on for tax or legal advice. Any information contained herein is of a general nature. You should seek specific advice from your tax or legal professional before pursuing any idea contemplated.