The Importance of ESG Integration in Retirement Planning

Financial wellness has gained a lot of traction in recent years. This is because any stress due to financial insecurity can have severe repercussions on the mental health of an individual. This is why many businesses have prioritised financial wellness in the workplace.

Financial wellness refers to an individual’s overall financial health as a result of effective expense management. It focuses on the current and future financial health of an individual and indicates the absence of financial stress in his/her life. Financial stress negatively affects the personal and professional life of an individual and consequently impacts their performance at the workplace. This has made businesses across the globe implement financial wellness programs. According to research conducted by the Bank of America, nearly 53% of organisations offer their employees financial wellness in the workplace.

Being financially healthy indicates an individual’s ability to tackle financial shocks, balance day-to-day finances and move seamlessly toward their financial goals. 

What can businesses do for financial wellness in the workplace?

Workshops can be organised to educate employees about financial planning so that they are better equipped to manage their money. They can organise talks and discussions on topics like sound saving techniques, budget planning, reducing debts, etc.

Various financial tools and software are available for improving the financial health of employees. These tools can provide personalised coaching, e-learning, on-demand financial recommendations, etc., to help improve the financial wellness of employees.

It is beneficial for organisations to plan perks like bonuses, credits, etc., through contributions to employee debts and provide other financial assistance.

A structured financial wellness program will help employees better manage various aspects of financial planning and reduce their financial stress.

Focus areas of financial wellness for an individual

Budgeting: The first step in financial planning is creating and managing a budget. A budget helps individuals stay on track while achieving their financial goals throughout their financial life. This includes planning for major financial expenses like student debt, housing loans, retirement planning, etc. 

Saving: Needless to say, saving is a very important part of financial wellness. Savings can help individuals deal with financial shocks like the loss of a job or unexpected situations like the pandemic, etc. All individuals should ensure that they save for emergencies, for retirement and for miscellaneous expenses.

Investing: Investing is a vital element of a financial wellness program. Investments provide individuals control over their finances and offer financial security. All these aspects reduce financial stress to a great extent. Individuals must ensure that they build a diversified investment portfolio that brings in good returns.

Insurance: Insurance safeguards people from unforeseen incidents. Some common types of insurance that can be considered are life insurance, health insurance, long-term disability insurance, etc. These types of insurance give you the financial security needed in case such situations occur.

Financial wellness programs can be held in the workplace to educate employees about these aspects so that they invest wisely. Retirement planning is a critical element of financial wellness.

Employees should be encouraged to invest in various financial instruments that will provide them a financially secure future. Retirement planning refers to estimating how much money an individual will need after they retire from their career or profession. A systematic retirement entails estimating future expenses and establishing financial goals according to these expenses. Individuals need to invest in various retirement accounts, pension plans, insurance policies, etc.

Sustainable retirement

Sustainable retirement planning has gained significant attention in recent times. It refers to integrating ESG (Environmental, Social, and Governance) in retirement planning. In other words, it implies ensuring that individuals consider the company’s environmental footprint, social responsibility, and governance standards while investing in its financial products.

ESG investing helps align financial objectives with one’s personal values. It has the potential to manage risks and offer better long-term financial returns. It helps an individual make a positive difference in global sustainability.

Examples of ESG investments:

  1. ESG Mutual Funds from high ESG-rated companies
  2. Including ESG investments in existing retirement portfolios.
  3. Impact investing or investing in financial products that not only provide financial returns but also make tangible environmental/social impact.

Organisations must ensure that they educate their employees about ESG investments during their financial wellness programs. Financial wellness in the workplace must encourage employees to build a retirement portfolio by choosing ESG investments so that they derive financial benefits after they retire and make an impact on global sustainability as well.

How Infosys BPM can Help?

Infosys offers a robust proprietary life/annuity platform VPAS to support multiple open and closed policies. Annuity administration outsourcing to us enables you to focus on the core functions of your business while we manage annuity and retirement planning. Our professionals leverage automation and advanced analytics to optimise underwriting processes. We offer a wide range of products to provide customised solutions that empower organisations in the annuity sector. 

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