Press Release

Socially Responsible Investment Options Now in 1 of 5 Retirement Plans

CONTACT:

Patrick Mitchell
pmitchell@hastingsgroup.com, (703) 276-3266

Mercer Report for Social Investment Forum Finds Two in Five Plan Sponsors Now Without SRI Option Say They Plan to Offer Choice in Next Three Years; Separately, Resource Guide Issued for Plan Sponsors Seeking to Learn More.

More and more Americans are getting a socially responsible investment (SRI) option in their defined contribution (DC) plans at work, according to new Mercer Investing Consulting data released today by the Social Investment Forum, which commissioned the groundbreaking research.

The survey finds that 19 percent of DC plans already include a SRI option and that 41 percent of all DC plan sponsors are not currently offering SRI options to investors but expect to be doing so within three years. This would translate to 60 percent market penetration for SRI options in DC retirement plans by 2010.

The new data explores the rapidly expanding SRI portion of the DC marketplace. The research was undertaken with project partners AltruShare Securities, Calvert, FTSE Group, Neuberger Berman, Northern Trust and TIAA-CREF. A total of 129 US plan sponsors, 16 DC plan administrators and 38 consultants participated in the survey, which was undertaken by Mercer Investment Consulting (plan sponsor and administrator research), with PLANSPONSOR magazine (survey of consultants).

Entitled “Defined Contribution Plans and Socially Responsible Investing in the United States,” the report concludes: “As institutional investors continue to consider environmental, social and governance issues within their investments and as these issues retain their prominence in the news, Mercer IC believes that overall demand for socially responsible investment options by DC participants will grow. In addition, certain types of organizations may see growth in SRI because of their mission, their commitment to sustainability, or because they employ a workforce with beliefs aligned with the tenets of SRI.”

Predictions for SRI growth are strong: 81 percent of plan administrators, 72 percent of consultants, and 47 percent of plan sponsors predict an increasing or steady demand for SRI over the next five years. The main forces behind this include a desire to align retirement plan offerings with the mission of the employer (e.g., a focus on corporate social responsibility), internal staff recommendations, and employee/participant requests for SRI options.

Social Investment Forum CEO Lisa Woll said: “Socially responsible retirement options are becoming a fixture of corporate America’s retirement plans. This is good news for investors and their employers. More and more Americans are interested in SRI funds because they offer a way to save for retirement, improve corporate responsibility and achieve significant environmental and social goals. Companies that offer them are providing a real benefit to their employees.”

Mercer Investment Consulting US consultant Craig Metrick said: “Mercer has been helping a growing number of DC clients provide an SRI option for their participants. We put SRI funds through the same rigorous selection process that is applied to traditional investment options. As fiduciaries, plan sponsors need to consider the merits of SRI overall, as well as the characteristics of the various investment options.”

Dave Stangis, director of corporate responsibility, Intel, said: “As a company continually striving to lead in socially responsible business practices, it just made good business sense to have an option that allowed our employees to put their money where their hearts are. Our employees are diverse and have strong views on why it’s important for the company they work for to be socially responsible. Part of meeting that expectation, now and in the future, means having 401K investment choices that are broad and include SRI options. This research identifies a clear trend in business today.”

KEY DATA FINDINGS

Other key report conclusions include the following:

• Health care and government organizations are so far the employers most inclined to add an SRI option as compared with all survey respondents.
• Actively-managed domestic large-cap equity SRI mutual funds are seeing the greatest demand from plan sponsors. In addition to this type of fund, respondents from all three groups said that actively managed income, balanced, and asset allocation/lifecycle mutual funds were most appropriate for SRI options.
• Misperceptions about the competitive track record of SRI and fiduciary issues still exist among some plan sponsors and need to be addressed.
• Plan sponsors and their advisers typically use the same evaluation criteria for SRI funds as for non-SRI funds. Past performance, volatility, and positive and exclusionary screening are viewed as the most important factors for fund evaluation. Plan sponsors and consultants/advisers primarily use non-SRI indexes to evaluate SRI fund performance.
• The number of pension consultants with clients requesting SRI fund recommendations has increased significantly over the last three years.
• Two in five plan sponsors reported that they do not currently have plans to offer an SRI option.

RESOURCE GUIDE AVAILABLE

The Social Investment Forum is encouraged by the fact that the survey findings confirm a growing demand for SRI. This demand represents an opportunity to respond to the lack of knowledge about SRI by plan sponsors. Consultants, advisers, and fund companies will need to play a vital role by providing education and information about SRI; showing the connection between corporate social responsibility and SRI; and reinforcing the fiduciary case in support of SRI.

As a first step in this direction, the Social Investment Forum commissioned Mercer Investment Consulting to produce a resource guide for plan sponsors illustrating how to add an SRI option to their retirement plan in six steps. For example, the guide points out that SRI fund options are available in a variety of asset classes and from a variety of platforms.

The full survey results and resource guide are available online at http://www.socialinvest.org/areas/research/other/ContributionPlansandSRIinUS.pdf.

REPORT METHODOLOGY

The survey was sent by Mercer Investment Consulting to potential respondents representing public, corporate, faith-based, healthcare, and other plan types. In total, 129 plan sponsors responded. The majority of the respondents offer 401(k) plans, are corporate organizations with less than 25,000 plan members, and have less than $5 billion in assets. The plan administrator survey was undertaken by Mercer Investment Consulting with a total number of 16 plan administrators responding. Overall, these respondents are the largest providers in terms of size of assets and number of accounts. A cross section of consultants and advisers responded to the consultant survey sent by PLANSPONSOR magazine, including large and small organizations, institutional consulting firms, and financial advisers.

ABOUT SOCIAL INVESTMENT FORUM

The Social Investment Forum (http://www.socialinvest.org) is the national association for the social investment industry. It is dedicated to the concept, practice, and growth of socially responsible investing. The Forum's more than 600 members include financial planners, banks, mutual fund companies, research companies, foundations, and community investing institutions.

ABOUT THE REPORT AUTHORS

Mercer Investment Consulting is a leading global provider of investment consulting services and offers customized guidance at every stage of the investment decision, risk management, and investment monitoring process. Mercer Investment Consulting’s Responsible Investment business helps investment fiduciaries integrate environmental, social and corporate governance (ESG) considerations into investment decision making and ownership practices. Mercer Investment Consulting is a unit of Mercer Human Resource Consulting, an operating company of Marsh & McLennan Companies, Inc. (MMC). MMC lists its stock (ticker symbol: MMC) on the New York, Chicago and London stock exchanges.

PLANSPONSOR is a source of news, information, tools and services for retirement industry professionals.

ABOUT THE REPORT SPONSORS

AltruShare Securities, LLC is a for-profit institutional brokerage firm that is owned by two nonprofit foundations. The first of its kind, the firm allocates two-thirds of its profits in support of community partners with proven experience in community-based philanthropy, investment and research.

Calvert has been a leader for over 25 years in the field of sustainable investing and corporate environmental, social, and governance research. With over $15 billion in assets under management, Calvert is committed to providing investors with a broad array of investment options including the largest family of socially responsible mutual funds in the US.

FTSE Group is a global leader in the creation and management of indexes. Over $2.5 trillion USD in assets under management globally are benchmarked to the 100,000 FTSE indexes calculated daily for markets worldwide, including SRI indices, such as the FTSE4Good series, and a range of mandate-specific custom options.

Neuberger Berman is a Lehman Brothers company that has managed investments for individuals, families and institutions since 1939. It is an investment firm built on an unwavering commitment to clients, a legacy of experience across market cycles, and a dedication to being the very best partner for financial intermediaries and their clients.

Northern Trust has more than 20 years of experience managing portfolios with environmental, social and governance factors and $23 billion in socially-screened assets through its investment management arm, Northern Trust Global Investments (NTGI). With more than $756 billion in assets under management, NTGI offers a full array of active, passive and enhanced products, manager-of-managers programs for alternative and long-only investments.

TIAA-CREF is a national financial services organization with more than
$414 billion in combined assets under management (3/31/07) and is the leading provider of retirement services in the academic, research, medical and cultural fields.

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