The Markets January 12, 2012

Institutional Investors Address Climate Risk

Institutional investors that participated in a survey by Mercer addressed climate change risk via asset allocation and other initiatives.
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Mercer found more than half have decided to include climate change considerations in future risk management and/or strategic asset allocation processes, and half have undertaken or plan to make changes to their actual asset allocations.  

One-third of respondents have begun to or plan to allocate more to “climate-sensitive assets” (identified as real estate, infrastructure, private equity, sustainable equities (listed and unlisted), efficiency/renewables (listed and unlisted) and commodities (including agricultural land and timberland)). Eighty percent have or will increase their engagement on climate change with companies and policy makers.    

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The survey was a follow-up to Mercer’s 2011 “Climate Change Scenarios – Implications for Strategic Asset Allocation” collaborative study. The study found that traditional approaches to modeling strategic asset allocation fail to take account of climate change risk; therefore, new approaches to strategic asset allocation are required to tackle fundamental shifts in the global economy.  

The 2011 report and the follow-up can be downloaded from http://www.mercer.com/climatechange.  

In January 2010, the Securities and Exchange Commission provided guidance on certain existing disclosure rules that may require a company to disclose the impact that business or legal developments related to climate change may have on its business—rules that cover a company’s risk factors, business description, legal proceedings and management discussion and analysis (see SEC Draws Attention to Climate Change Reporting).  

Mercer previously said it can provide clients with a “carbon footprint” analysis of their portfolios, and compare it to a chosen benchmark, such as the FTSE All-Share, S&P 500 or Russell 1000 (see Mercer to Size Up Carbon Footprints).

Products January 12, 2012

ING Launches Guaranteed Income Solution

 

ING’s U.S. Retirement division launched the ING Lifetime Income Protection Program. 

 

 

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The new asset allocation program will help 401(k) plan participants convert their savings over time into guaranteed income that lasts throughout retirement. 

The ING Lifetime Income Protection Program is initially being offered to customers in ING’s corporate defined contribution plans. It provides participants with a series of target-date asset allocation models, or “portfolios,” that help build critical retirement savings followed by an income benefit for life, guaranteed by multiple leading insurers. 

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ING worked closely with AllianceBernstein to design a program that leverages the firm’s multi-insurer platform, while incorporating both guaranteed and non-guaranteed components into one consolidated program. 

The non-guaranteed component consists of multi-manager, target-date collective investment trust funds.  These funds seek to leverage the benefits of both active and passive investment strategies from several fund companies.  ING’s asset manager, ING Investment Management, oversees these collective trusts.  AllianceBernstein also serves as an investment manager.

The guaranteed component, which is triggered at a certain time as a participant gets closer to retirement, is provided through multiple insurance contracts, each issued by one of three insurance companies — ING’s own ING Life Insurance and Annuity Company, as well as AXA Equitable Life Insurance Company and Nationwide Financial. Investors benefit by having ING provide a single, consolidated program with the multiple insurance companies splitting the responsibility under the contracts.  This diversifies risk and helps participants receive competitive payouts. 

 

 

Other benefits and features of the ING Lifetime Income Protection Program include:

•  Contracts that offer the potential for income growth from market gains, as well as income protection against market losses through a minimum guaranteed withdrawal benefit (MGWB). This feature provides participants with a stream of guaranteed retirement income for life.

•  Flexibility for participants to withdraw their assets or transfer to other investment options at their convenience — giving them full control while in the program.

•  A cost structure designed to benefit participants by allowing them to pay for the MGWB guarantee only when assets are allocated to the contracts available through the portfolio.

•  A platform that adheres to the recommended recordkeeping standards established in support of plan sponsor portability by The Society of Professional Asset-Managers and Record Keepers (SPARK) Institute.   

 

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