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CalSTRS awards $750m across three non-US sustainability-focused mandates

Assets awarded to Hermes, Impax and Schroders

The California State Teachers’ Retirement System (CalSTRS) has turned to three UK-based asset managers to run $750m (€659m) of non-US sustainable equities.
Hermes Investment Management, Impax Asset Management and Schroders have been awarded the contracts.
$200m has been allocated to Impax AM’s Impax Leaders Strategy, a fossil-free fund with a portfolio of 40-60 companies deemed to be addressing long-term macroeconomic themes such as the depletion of natural resources, growing populations and rising consumption. The fund is benchmarked against the MSCI All Country World Index (ACWI) and invests over a five- to seven-year horizon. Year-to-date, the strategy has outperformed, but last year it returned -7.8% (gross) against the benchmark’s -3.8%. Between 2015 and 2017, inclusive, it outperformed the MSCI ACWI.
Details of the contracts awarded to Hermes and Schroders were unavailable at the time of publication.
Kirsty Jenkinson, Director of Sustainable Investment and Stewardship Strategies at CalSTRS, said that the selected firms were “highly attuned to how sustainability-related trends, like the low-carbon transition and resource efficiency, create investment risks and opportunities”.“We are excited about these new partnerships and their expertise in delivering resilient financial returns amid a rapidly changing global economy,” she said.
This is the first sustainability-focused mandate awarded by CalSTRS since Jenkinson joined the fund at the end of last year, from Illinois’ Wespath Benefits and Investments, where she led the sustainable investment strategies team.
The three managers – together with Generation Investment Management and AGF Investments – have emerged from a CalSTRS manager pool established in 2016 in a bid to diversify the $6bn Sustainable Investment and Stewardship Strategies portfolio.
Both CalSTRS and fellow Californian pension giant CalPERS were petitioned recently by NGOs to adopt “best-practice recommendations” for reporting on climate-related financial risks, in order to comply with the new legislation and “avoid legal liability”.
A CalSTRS spokesperson told RI: “We believe that this mandatory legislative report will have a positive two-fold effect: it will enhance the visibility of CalSTRS engagement in considering the adverse impacts of climate change on our investment portfolio; and our climate-related financial risks reporting efforts will produce data that underscores CalSTRS commitment to a low-carbon economy. We look forward to sharing our updated report later this year.”