It isn’t just Gen-Z plan members asking for environmental, social and governance (ESG) investment options in their DC plan. Even as markets have grown more volatile, there is now an established market for ESG-friendly alternatives across the country. How can plan sponsors leverage these options to make DC plans more relevant to current and prospective employees.
Chris Reynolds, manager of pension policy with the Canada Post Pension Plan, will share his plan’s path to ESG integration at the upcoming DC Plan Experience Forum being held in Toronto at the Shangri-La Hotel from February 15 to 16, 2023. In advance, we asked Chris some questions about his DC plan’s approach to ESG right now:
What does your approach to ESG look like in your DC plan right now?
Our approach to integrating ESG factors into our DC plan first started with a review of our investment beliefs outlined in our CAP SIPP. We believe that environmental, social and governance factors can have a material financial impact on investment performance, particularly over the long-term, and should be considered in the investment process.
Most of our members’ assets, like a lot of plan sponsors, are invested in target date funds and
we’ll be retaining our current TDF manager as they begin integrating ESG into their target date
funds. We felt that it was important to integrate ESG where the majority of assets are invested.
What are some of the challenges you encountered in implementing ESG into your DC Plan?
One of the main challenges was waiting on investment product innovation. We updated our CAP SIPP three years ago in anticipation of future products that would allow us to integrate ESG that not only matched our beliefs but would also improve member outcomes. Once we had some TDF ESG options available in the Canadian marketplace, the next challenge was deciding what investment product to choose.
Integrating ESG factors can be done in a variety of ways and since there are so many different moving parts to consider, we requested that our consultant provide us with a detailed analysis of all available options so we could fully understand the impacts on our members. Once we were equipped with all the relevant data and information, we were then able to recommend our selection to our Pension Committee for approval.
As a fiduciary, why is ESG important to integrate into your DC plan? Are members asking for it?
As a fiduciary, our primary purpose is to provide our members with retirement income. To achieve this, we must act responsibly and prudently and always keep our members best interest at heart. We believe that ESG is not just a trend, but a risk factor that can have a material effect on investment returns, particularly over the long-term and will help improve member outcomes.
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