Could ESG Options Undermine Participant Outcomes?
Despite surveys to the contrary, a new study finds that overall interest in ESG strategies by participants is “relatively weak” and “driven by naïve diversification.” The difference may, of course, be attributed to the difference between what individuals say—and what they actually do. Unlike surveys that purport to capture participant (and plan sponsor) sentiments, the research by David Blanchett of PGIM and Zhikun Liu of the Employee Benefit Research Institute (EBRI) looks at the actual allocation decisions of 9,324 [i] newly enrolled DC participants who are self-directing their accounts in a DC plan that offers at least one ESG fund. ‘Weak Preferences’ They do so in a paper titled “ ESG Fund Allocations Among New, Do-It-Yourself Defined Contribution Plan Participants ,” they claim to find that overall interest in ESG strategies among these participants is “relatively weak,” with only 8.9% of participants having any allocation to an ESG fund...