Can a commitment to strong environmental, social, and governance (ESG) practices help attract and retain talented employees? ESG investing matters more than you might think.
Consider Donna and Sam Franklin, who were young medical researchers when they met and married. Throughout their careers, their cancer research was ground-breaking. Between the two of them, they accumulated a few dozen patents in several industries. Roughly a decade ago, they decided to use their knowledge and products to launch BioHealth, a life sciences company that would bring their patents—mostly in the area of improving cancer treatment and research operations—to market.
Building an Environmentally Sound Company
From the beginning, Donna and Sam, now in their 60s, were committed to making their business as sustainable as possible. Committed to reducing environmental impact, they mandated water-saving and recycling practices, invested in energy-saving improvements to their building, eschewed animal testing, and vetted suppliers for sustainability practices, among other activities. The company’s 125 employees embraced these actions and the organization’s conservation culture, wholeheartedly.
BioHealth is growing quickly. Two of the company’s award-winning products, which help cancer research labs operate more sustainably, have received much attention and are poised to catapult the company’s growth. However, like many companies, success requires hiring exceptional employees to fuel innovation and growth. In a tight labor market, competing for talent has become challenging.
Cassie, a 26-year-old biomedical engineer, is one of the company’s most recent hires. She has the combination of science and engineering knowledge and business acumen that have quickly set her apart as a star employee and someone who will be important to BioHealth’s future. Donna and Sam have even discussed offering her an equity stake before they take the company through an initial public offering within the next five years.
Walking the Talk in ESG Investing
Each August, Sam and Donna close the company doors for an afternoon for BioHealth Employee Day, where they review the health insurance, 401(k), and other benefits and perks the company offers. They noticed Cassie’s look of concern as she flipped through the information packet on the company’s 401(k) plan. Sam asked her if there was something wrong and Cassie pointed to the list of “top holdings” of the mutual funds in which the plan was invested.
Cassie explained that she had concerns about many of the companies there. One company was responsible for a massive chemical spill in the western United States. Another company had several high-profile sexual harassment scandals and had a reputation for sexist practices among senior management. It didn’t seem right to support those practices with her retirement investments, she said. Despite many offers, she had joined BioHealth, in large part, because of its values-based and sustainable culture. Couldn’t the company apply those same thoughtful practices to their investment options within the retirement plan? Could they align those values, which they all felt so compassionate about, with their investments?
Cassie’s questions are at the foundation one of the most exciting trends in the world of investment markets—values-based investing. The field of ESG—environmental, social, and governance—investing does just that, allowing investors to focus their investment dollars on those companies that are acting as good corporate citizens through their environmental footprint, social policies, and corporate governance practices.
Bringing ESG to Retirement Planning
While ESG investing has emerged as a growing trend among thoughtful citizens investing on their own, it has not yet been widely employed within qualified retirement plans. Recently, forward-thinking employers have begun to incorporate the concept within their retirement plans in an effort to attract and retain employees who want to invest according to their values.
A recent study from Natixis1 found compelling support for the inclusion of ESG options within company retirement plans; roughly three-quarters of all investors globally desire to invest in companies that reflect their personal values, 67 percent of those with access to a plan who do not participate say they would start contributing, and six in 10 participants say they would increase their current contribution rate if they knew their investments were doing social good.
These early adopters are leading the way in enhancing the benefits they offer to current and potential employees and are empowering their employees with the tools to feel good about their investments. As stewards of our clients’ investment assets as well as their financial well-being, RegentAtlantic works with employers to offer these options to companies and the employees that demand them.
BioHealth is a fictional name for the purpose of this article. Any resemblance or similarity is unintended and coincidence.
1ESG in 401(k) Plans: From “Nice to Have” to Fiduciary Obligation
Important disclosure information
Please remember that different types of investments involve varying degrees of risk, including the loss of money invested. Past performance may not be indicative of future results. Therefore, it should not be assumed that future performance of any specific investment or investment strategy, including the investments or investment strategies recommended or undertaken by RegentAtlantic Capital, LLC (“RegentAtlantic”) will be profitable.
Please remember to contact RegentAtlantic if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and services, or if you wish to impose, add, or modify any reasonable restrictions to our investment management services. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request.
This article is not a substitute for personalized advice from RegentAtlantic. This article is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed in other businesses and activities of RegentAtlantic. Descriptions of RegentAtlantic’s process and strategies are based on general practice and we may make exceptions in specific cases.
RegentAtlantic does not provide legal or tax advice. Please consult with a legal and or tax professional of your choosing prior to implementing any of the strategies discussed in this article.