ESG in DC - An Interview with Debra Roberts of MSRP

How do you personally define ESG investing, in the context of defined contribution?

ESG, as far as I am concerned is defined as “an institutional recognition of investment policy and environmental, social, and governance factors that may impact portfolio performance and affect fiduciaries’ ability to meet its obligations.”

How much interest do you observe from your participants in ESG options, and do you predict that level of interest changing amid the COVID-19 pandemic?

Not much really. Interaction from participants are most concerned with the CARES Act - how it applies to them, market volatility and communicating with staff due to office closures and web only interactions. Our plans have only one specific ESG fund; which is used moderately for plans of our size. I don’t foresee the pandemic changing participant perspective; however, our board is seeking to integrate solid policy changes to ensure the plans consider environmental, social and governance practices as part of the selection and evaluation of fund managers.

What do you think is the single most difficult obstacle to implementing ESG options in DC – concerns over returns, lack of participant interest, different viewpoints on what ESG options should contain, or something else?

The leading obstacle in implementing ESG options in our plans would be the vast and varying viewpoint on what ESG options should contain. Also, it is essential to note there are no universal applications of ESG standards. The ESG metrics and measurements are inconsistent; ESG issues are complex and continually changing, and finally, ESG disclosure appears inconsistent, and for the most part, voluntary.

Amid the pandemic, some have suggested that ESG is being relegated to the backseat, while others feel that the pandemic has highlighted the need to take environmental and social concerns into investing – overall, what are your thoughts on how COVID-19 will impact ESG?

For our organization, ESG is still relatively young and evolving, COVID-19 has not shifted our focus. While ESG is not on the back burner, our communication strategy is highlighting buy and hold over the long-term with implementation strategy of the CARES Act as it impacts DC Plans. The COVID-19 pandemic could have some impact on strategies fiduciaries consider when assessing value and opportunity; but this is not easily determinable at this time. I would consider a wait and see approach, relative to the pandemic and how governments and markets continue to respond.

What is your suggestion for the plan sponsor community and the industry at large at this point to moving ESG investing forward in the DC space?

I would highly recommend communicating with other Plan sponsors through sharing of ideas, collectively establishing best practices regarding ESG guidelines. Plans sponsors could seek to better understand other plans and the types of processes implemented to support ESG and be willing to share with other DC plan sponsors best practices.