Employee Savings Plans: Are the Funds Sufficiently Committed to the Energy Transition?

Epsor, a mission-driven company specializing in employee savings and retirement plans, has published a study covering more than 271 funds available through employee savings and retirement plans. 

This study analyzes several indicators from Morningstar, a provider of non-financial data, such as fossil fuel financing, energy transition financing, carbon footprint, and the most heavily financed companies. The goal is to raise collective awareness of the impact of employee savings and retirement plans, to provide guidance on how to better integrate these plans into companies’ CSR initiatives, and to identify the most committed employee savings providers and investment vehicles.

Employee savings and retirement plans: an important source of funding for the energy transition, but still not ambitious enough

Today, 12 million employees have access to an employee savings plan, with a total of 188 billion euros saved through employee stock ownership and investment vehicles. However, the requirements and incentives for more responsible investments are limited, and it will not be until July 2024 that companies will be required to include at least one certified fund that incorporates non-financial criteria in their savings plans. Currently, 1 out of every 2 euros is invested in a fund that does not have a responsible finance label, and more than 30% of assets under management are invested in funds that do not take ESG criteria into account (SFDR regulation—Article 6).

Employee savings and retirement investment vehicles are still not sufficiently aligned with current climate challenges

The study reveals that 4 out of 5 employee savings funds invest in at least one company involved in unconventional fossil fuels. TotalEnergies is the third-most-funded company among those analyzed. On average, only 5.66% of the funds’ assets directly finance the fight against global warming. Furthermore, one in two funds is a “feeder” fund, which can exacerbate the lack of transparency and make it difficult to know in which companies one’s savings are invested.

The most actively managed funds available through employee savings plans

The Impact Score, developed by Epsor as part of its annual studies on socially responsible investing, highlights the 15 funds most committed to the energy transition in employee savings plans. Epsor also wishes to highlight the five funds that provide the most funding for the fight against global warming.