18-Feb-15 / Posted By Christopher Ito
Expanding Divestment: University-Sponsored Defined Contribution Plans
The fossil fuel divestment movement has gained significant momentum across college campuses thanks to organizations like 350.org. On Monday, January 12, 300 Stanford University faculty members called for the divestment of fossil fuel companies from the endowment investment portfolio. While divestment calls have mostly targeted university endowment pools, we have started to see calls by university faculty to provide fossil free investment choices in their retirement plans.
Public universities will typically sponsor a Section 403(b) defined contribution retirement plan, which is similar to its 401(k) cousin used by corporations. From our discussions with on-campus divestment advocates, they are beginning to view participant-directed retirement plans (sometimes as large if not larger than endowments), as a natural extension of their divestment efforts. Defined contribution plan sponsors use retirement plans as an attraction and retention tool, while also seeking to increase employee participation. Providing investment choices that meet the demands of participants is a goal of both plan sponsors and the asset management companies who serve those plans.
In looking at the history of defined contribution plan investment choices, we have seen the industry create products that respond to the demand of certain participant segments. The introduction of target date retirement funds and self-directed brokerage are historical examples of this evolution. Given the strength of the divestment movement on college campuses, and as more faculty and staff put pressure on the university plan sponsors, we believe that mutual fund companies and 403(b) providers have a great opportunity to gather assets from the entire education sector by providing core fund products, or line-ups that are negatively screened for fossil fuel investments.
…(read more).
Global Climate Change
Environment Ethics
Environment Justice
Transition Studies 