California’s ambitious new CalSavers workplace scheme to include ESG option

Workplace DC scheme projected to grow to $98bn within 15 years

California’s ambitious new state-backed auto-enrolment workplace pension scheme – predicted to swell to $98bn in assets over the next 15 years – will include an ESG option for its private sector members, according to a recently closed request for proposal (RFP) document.

ESG is described as a “core outlook” for the new defined contribution (DC) scheme, called CalSavers, in its Investment Policy and includes it among its 10 investment beliefs, along with other responsible investment issues like fees transparency.

The California Secure Choice Retirement Savings Investment Board, which oversees the scheme and includes the state’s Controller, Betty Yee and Treasurer, John Chiang among its nine-strong board, is looking for providers of administrative and investment services for the nascent scheme.

CalSavers’ board is being advised by Meketa Investment Group, the PRI signatory which has more than $600bn under advice.

The RFP, which closed last week, states that the new scheme will seek to offer an “Environmental, Social, and Governance (ESG) Fund with the primary focus on social and environmental responsibility” as one of four potential investment options available to members.

CalSavers, described as the “most ambitious push to expand retirement security since the passage of Social Security in the 1930s”, aims to reach the over 7m low to moderate income workers – mostly women and people of colour – in the state without access to retirement plans.All Californian private sector employers with five or more employees that don’t offer a retirement plan to their workers will have to enrol them in the new scheme over the next four years, following legislation signed by Governor Jerry Brown in 2016.

But the new retirement scheme has faced opposition. Anti-tax group the Howard Jarvis Taxpayers Association is suing the state over the scheme arguing that it violates federal law and is a waste of taxpayers’ money.

“The most ambitious push to expand retirement security since the 1930s”

California will be the fourth US state to create its own state-sponsored retirement programme but is the only one to make such explicit references to ESG.

Oregon launched Oregonsaves in July 2017 and the following March Washington State launched the Small Business Retirement Marketplace. Illinois started the pilot phase of its scheme, Illinois Secure Choice in May. Both Illinois and Oregon hired US savings solution provider Ascensus to oversee the administration of the schemes.

CalSavers anticipates the scheme will open with a pilot program in late-2018 and officially open for state-wide enrolment in 2019.