Welcome to Financial Advisor IQ

Wells Fargo and BlackRock's Strategy to Win More Millennials with ESG Offerings

June 18, 2018

Asset manager BlackRock and wirehouse Wells Fargo are tapping into investors’ desire to invest in a socially responsible way, with both firms developing ethical investing-focused target-date funds, people familiar with the matter tell Bloomberg.

The two firms are aiming to lure millennials, who’ve been ambivalent about investing for retirement while evidence suggests they’d like to see ESG options, according to the news service. Two-thirds of millennials haven’t saved anything for retirement yet, according to a February report from the National Institute on Retirement Security cited by Bloomberg. Furthermore, interest in ESG investing has surged in recent years, with assets under management in such funds tracked by Bloomberg soaring 37% last year, according to the news service. But among 401(k) plans, less than 10% currently offer the option, Edward Farrington, executive vice president for retirement strategies at Natixis Investment Managers, tells Bloomberg.

BlackRock already annually “engages” with around 1,600 firms on ESG topics and includes the topic as part of its investment analysis, the news service writes. The company has also said firms should integrate social needs into their business, according to Bloomberg.

Both BlackRock and Wells Fargo see ESG funds as driving growth in retirement assets despite an April guidance from the Department of Labor urging caution in the area, the news service writes. Alex Bernhardt, U.S. head of responsible investment at consulting firm Mercer, tells Bloomberg that the guidance could put a damper on integrating ESG among plan sponsors.

A BlackRock spokesman declined comment to the news service on any specific plans for ESG funds, only saying that “sustainability-related issues” can help drive company performance. A Wells Fargo spokesman also declined comment to Bloomberg. Fund managers, meanwhile, believe getting ESG funds into retirement plants, which are typically conservative, could take years, according to the news service.

By Alex Padalka
  • To read the Bloomberg article cited in this story, click here.