CalSTRS launches search for up to 10 ESG/corporate governance equities managers

Leading investor plans to establish ‘pool’ of ESG managers

The $192.9bn (€175bn) California State Teachers Retirement System, CalSTRS, has launched a search for up to 10 investment managers to provide ESG-focused and corporate governance services for public equities, Responsible Investor can reveal.

In an ‘Alternative Solicitation Process’ (ASP) document, CalSTRS says it intends to award up to six contracts for active or passive US, Non-US or global public equity ESG focused investment management services.

It will also award up to four contracts for active or passive US, non-US or global public equity corporate governance focused investment management services.

CalSTRS is using the process to establish a ‘pool’ of qualified managers – which will be used to replace firms that “might be terminated in the future”. Contracts for firms in the pool will be signed prior to funding.

It comes as the giant Californian pension fund is paying more attention to ESG issues, especially climate change. It has publicly said it will start to target the appointment of board members with specific expertise in managing climate risk at investee companies.

CalSTRS has also faced pressure from its membership wanting it to divest from controversial holdings like fossil fuels and weapon makers.

Its chief executive, Jack Ehnes, is currently chairman of the FTSE Environmental Markets Advisory Committee and a member of the FTSE4Good Advisory Committee. He also serves on the board of Ceres, a US network of investors and environmental organisations working to address sustainability challenges.Ehnes told the Financial Times over the weekend that the fund is planning to move $20bn of externally managed assets in-house – on top of $20bn already moved in-house over the past year. He was quoted saying that for every every $10 it pays an outside manager “we would pay $1 inside.”

CalSTRS has $109.3bn invested in global equity, or around 56.6% of its total portfolio. The ASP does not indicate how much it could allocate to its prospective ESG managers.

To qualify for consideration an organisation must have been running an ESG or corporate governance focused public equity strategy for at least two years and have a minimum of $100m in assets under management along an ESG or corporate governance focused public equity strategy.

The deadline for tenders is Friday 28 October 2016, with a technical evaluation starting on the following Monday. CalSTRS anticipates that the manager selection process should conclude in mid-2017.

The ASP is on now on the California electronic procurement site.

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