Understanding the climate impact of your company’s retirement plan can offer more than environmental insights. It can help you strengthen employee benefits, improve financial literacy, and make more informed decisions about how your resources support both business objectives and sustainability commitments.
Retirement plans are designed to help employees build long-term financial security, and many companies work hard to reduce emissions from their buildings, travel, and supply chain. Yet the money in a retirement plan is invested too, and the emissions tied to those investments often go overlooked.
So, do companies understand the climate impact of their retirement plans? And what could they gain by finding out?
The Overlooked Climate Impact of Retirement Plans
Every retirement plan supports businesses with their own environmental footprint. Employer-sponsored plans typically offer employees a selection of investment funds holding stocks, bonds, and other assets, and those funds invest in companies across many industries.
The greenhouse gas emissions tied to these investments are called financed emissions. Examining the investments in your plan shows which emissions your plan is linked to and how those investments align with your climate goals.
That opens up how your company thinks about sustainability. Instead of treating retirement benefits as separate from your sustainability strategy, you can see how your plan’s investment choices connect to both your employees’ financial goals and your carbon footprint.
Beyond Emissions: The Business Benefits
Understanding financed emissions can also support broader business objectives, in three ways.
Environmental Performance and Profitability
Knowing your plan’s financed emissions helps close a gap in your climate picture. Improving environmental performance and improving the bottom line don’t have to be mutually exclusive: integrating sustainability into business decisions can help organizations identify operational efficiencies, manage risks, and explore cost-reduction opportunities.
The research supports this, with one caveat. NYU Stern’s Center for Sustainable Business found a positive link between sustainability and financial performance in most of the corporate studies, which measured outcomes such as return on equity, return on assets, and stock price. The authors attribute the link to factors such as more innovation, higher operational efficiency, and better risk management. But studies of disclosure alone found a positive link far less often than studies of actual performance, such as cutting greenhouse gas emissions. Measuring your plan’s emissions is the first step; what you do with the results is where the value lies.
Financial Literacy and Employee Well-Being
Clearer information about retirement investments helps employees make informed decisions about their futures. Retirement plans can be complicated, especially when employees are sorting through investment options, fees, risk, and long-term savings goals on their own.
When employees can see how their savings are invested, they also learn how investment decisions relate to their financial objectives and to environmental considerations. That can strengthen the relationship between employees and employer.
Feeling more informed and confident about their financial future may also support employees’ mental wellness. Financial literacy and well-being are worth tracking alongside engagement, absenteeism, and retention as possible leading indicators of organizational performance. These relationships vary by organization, but they are a good reason to treat employees’ financial and mental wellness as part of your company’s overall approach to performance.
Strengthening Employee Engagement and Retention
Transparency about the retirement plan can help employees engage with their benefits and trust their employer. Compensation is only one part of the employee experience; benefits, workplace culture, and alignment with organizational values also shape how employees view their employer.
Employees may value knowing where their retirement savings are invested and whether the available options align with their personal values. Offering that information shows that your sustainability commitments extend beyond public statements and into a benefit that affects employees directly.
What You Can Do Today
You already work on the emissions from your buildings, travel, and supply chain. Your retirement plan is the next place to look. Understanding retirement plan emissions is an opportunity to look beyond traditional measures of corporate sustainability, but without the right data and expertise, it can be challenging.
Investature can help you find the answers, providing greater visibility into financed emissions and supporting a more intentional approach to the intersection of investing, employee benefits, climate action, and your company’s long-term goals. Email jessica.cohen@investature.com with your company and a few times that work, and we'll set up a free 30-minute call to get started.