Sustainable 401(k)s Can Strengthen Your Future | stok

Sustainable 401(k)s Can Strengthen Your Future

Sustainable 401(k)s Can Strengthen Your Future

Sustainable 401(k)s Can Strengthen Your Future

In your daily life, you may seek out products that are better for the planet, and perhaps you’ve even embedded sustainability into your career. But does your retirement portfolio reflect these values?

One of the most persistent myths about sustainable investing is that you need to sacrifice profit for impact, and the returns of sustainable investing will not be as high as investing in fossil fuel assets or other extractive companies. Critics say that sustainable investing limits the investment universe and returns from high-performing asset classes. However, many studies refute this. In fact, a meta-study of over 2,000 studies found that roughly 90% of studies did not see a negative relationship between environmental, social, and governance (ESG) factors and corporate financial performance. More significantly, the vast majority of studies reports positive findings. The positive ESG impact on financial performance appears stable over time.

While past performance is no guarantee of future results, as of June 30, 2017, the HIP Fossil-Free Balanced-Growth Portfolio (a moderate-risk portfolio with 60% in equity funds and 40% in bond funds) model has returned 11.45% net of fees, outperforming the Dow Jones moderate-risk portfolio index model benchmark return of 10.35%, exceeding by +1.10%, (the equivalent of a 10% higher reward for sustainability) over the previous 12 months; over the last 3 years, the HIP model net of fees performance exceeded the Dow Jones model by +1.97% per year (a reward of 45% higher for higher sustainability).

Many large institutional investors (like universities, foundations and government entities) have began to divest from fossil fuels. Even the Rockefeller Brothers Fund, a family foundation created from a family’s wealth derived from oil, said it was withdrawing all of the $45 million it had invested in fossil fuels in 2014. A 2015 study found that investors who dumped holdings in coal, oil and gas earned an average return of 13%-a-year over 5 years, compared to the 11.8%-a-year return earned by conventional investors (source MSCI).

At stok, 100% of eligible employees participate in its sustainable, fossil-free, gun-free 401(k) plan, resulting in a stronger, more resilient portfolio, and reducing greenhouse gas emissions. The current plan, provided online by Money Intelligence and powered by HIP Investor’s sustainable investment ratings and portfolios, is applicable across 20 investor risk profiles.

While past performance is no guarantee of future results, as of June 30, 2017, the HIP Fossil-Free Balanced-Growth Portfolio (a moderate-risk portfolio with 60% in equity funds and 40% in bond funds) model has returned 11.45% net of fees, outperforming the Dow Jones moderate-risk portfolio index model benchmark return of 10.35%, exceeding by +1.10%, (the equivalent of a 10% higher reward for sustainability) over the previous 12 months; over the last 3 years, the HIP model net of fees performance exceeded the Dow Jones model by +1.97% per year (a reward of 45% higher for higher sustainability).​

Sustainable investing has already captured more than $8.72 trillion dollars (over 1 out of every 5 dollars​ under professional management​), according to the trade association US-SIF​. To include sustainable investing in your 401(k) at work, ask your peers and colleagues to join you in engaging with your CEO, CFO and Human Resources and Benefits department to include sustainable investment choices, and demand a more sustainable world via your 401(k).

This article was written by Megan Morrice and Paul Herman, registered representatives of investment adviser and impact expert HIP (Human Impact + Profit) Investor Inc., which is registered in the states of California, Washington, and Illinois.  Past performance is not indicative of future results. All investing risks loss of capital. Model performance may not align with an individual’s actual results due to fees, timing of investing or divesting, and other factors. This is not an offer of securities.