Increasing consideration of sustainable investing in retirement plans has been driven by growing recognition of climate change and evolving consumer preferences, as well as innovations in both data and investment products, heightened regulatory focus, and continued media coverage. As a first step toward providing objective research on this topic, this Issue Brief studies the adoption of one kind of sustainable investment — environmental, social, or governance (ESG)-themed investment options — among public defined contribution (DC) plan participants.
To study the prevalence and adoption of ESG investing in employer-sponsored retirement plans, we use data collected by the Public Retirement Research Lab (PRRL). In this Issue Brief, we study the ESG investment decisions of approximately 32,000 participants in public-sector defined contribution retirement plans. We show that using plan-level aggregate values to assess individual participants’ ESG investment decisions gives an incomplete picture in assessing participant preferences. While dollar allocations to ESG funds at a plan level may be small (on average, 2.7 percent in our sample), we find an overall ESG adoption rate of 31 percent and an average ESG allocation for ESG-investing participants of 14 percent.
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- March 4, 2022 Create Date
- August 31, 2023 Last Updated