Environmental, social and governance (ESG) investing options have been growing in popularity over the years, but the financial services industry may see a sharp increase in interest in 2022. This comes on the heels of the largest U.S. defined contribution retirement savings program, the Thrift Savings Plan (TSP), announcing it will make ESG funds available starting in the summer of 2022.
Partner F. Michael Zovistoski noted the size and scale of the TSP will encourage employers and investors to consider adding the funds to their lineups, too. “The federal TSP is huge, so to be allowed on that platform will really escalate the exposure of ESGs and what investments are there,” Zovistoski said.
Despite the move toward ESG funds, Zovistoski said there still needs to be additional guidance for investors. His concern is for the securities within the TSP’s fund, which could be anywhere between 35 to 60 individual securities. “The question is: Is one individual company inside that ESG fund compliant or are all of them?” he asked. “My fear is that investors, in what’s touted as an ESG-compliant fund, may or may not realize that every investment inside that fund is not super compliant.”
“That may be the reason as to why the federal government put that off for another year, to get some regulation on that as well,” Zovistoski said. ”People are looking for a lot more guidance, and hopefully we’ll get there in the next year.”
Read the full article published by Plan Sponsor.