Sustainable Investing Options in UNC System Retirement Plans Will Be More Prevalent

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If you are an employee at UNC-CH, you may have heard that major changes are coming to the two retirement plans offered by the UNC System.  These changes affect employees who participate in the Optional Retirement Plan (ORP) and the 403(b) plan. The Teachers’ and State Employees’ Retirement System (TSERS), 401k or the 457 plans are not affected by these modifications.

Beginning July 1 the assets invested in funds that you own in 403(b) or ORP accounts with TIAA-CREF or Fidelity will be “mapped” to other funds, if the funds you own are not part of the core set of funds. In many cases this mapping will move your assets to funds you did not choose, and in some instances mapped to funds with different investment objectives. You can and should take action after July 1 to reallocate your accounts in the manner you desire, keeping in mind your personal retirement goals.

Secondly, as of July 1 Lincoln Financial Group and VALIC will no longer be available to new ORP participants. If you have an account with either provider, you must transfer your assets and redirect your future contributions to Fidelity, TIAA-CREF or a combination of these two remaining providers by December 31. If you fail to take action by this deadline, General Administration will transfer your assets to TIAA-CREF, where they will be invested in a Vanguard Date Fund.

Third, new investment options will be available on July 1 in the ORP and 403(b) plans. The two remaining providers, TIAA-CREF and Fidelity, will offer significantly more investment alternatives within the ORP, similar to changes made to the 403(b) a few years ago.

Although the changes come with complications, they also present opportunities: One of which is the ability to invest in funds with socially responsible principles. Traditionally, this has meant investing in firms that pass certain social, environmental and governance screens. Our firm believes in a related theme: resource optimization, or Sustainable Investing (SI).

There is compelling evidence that our world is reaching a tipping point—beyond which the availability and/or price of various resources is likely to restrict access—unless we can achieve significant efficiencies in supply and use. The expansion of multiple emerging markets, particularly in China and India, drives this trend. We believe that a revolution in efficiency has already begun and this is creating unprecedented opportunities for investors.

SI addresses eight investment areas: the environment, climate, water, energy, food and agriculture, materials, and health. The companies in this space are, are among other endeavors, creating products and processes that mitigate or control pollution and positioning themselves to take advantage of physical, economic and social changes resulting from climate change.

Additionally, these companies are developing:

  • Products and processes to remedy problems arising from population growth and coincident personal, industrial and agricultural demand for water,
  • Technologies for more efficient use of traditional energy sources,
  • Alternative energy sources and storage technologies,
  • Production, storage and delivery methods to improve farm-to-user efficiency,
  • Alternative materials or processes for more efficient use of finite resources,
  • Drugs to treat the chronically ill, and
  • Solutions arising from issues related to the world’s aging population.

You do not have to compromise on returns when investing in SI funds. From a pure macroeconomic perspective there are few drivers of long-term global growth as important as population expansion, rising living standards and increasing urbanization. We believe that companies operating in this arena will only become more competitive and profitable, making them a wise investment choice.

Historically, UNC System retirement plans have had only a limited number of investments that meet SI criteria—only one for an extended period of time. As of July 1, this will no longer be the case. Because of the new, expanded investment options, you now will be able to select from over ten families of funds focused around sustainability, providing domestic and foreign equity as well as bond-based investments. If a sustainable investment theme is of importance to you, changes to the UNC System’s retirement plans will enable you to pursue a more robust and diversified portfolio consistent with those values.

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