ICGN conference report: FRR, CalSTRS, PGGM and Ontario Teachers talk governance

Antoine de Salins, executive director of the €29bn French pensions reserve fund, Fonds de Reserve pour les Retraites (FRR), has called for institutional investors to push for a “higher degree of micro financial stability” to enable to proper long-term investment. De Salins said this should include a focus on “more alignment” of the interests of long-term investors with the rest of the financial industry, such as asset managers and investment banks. Speaking at the International Corporate Governance Network (ICGN) conference in London on March 25, De Salins pointed out that funds like the FRR are facing increasing calls for transparency from stakeholders about their portfolios and financial engagement policies. He said the FRR currently engages with a “very modest” 15 companies in its 2,500-strong equities portfolio, due to a lack of resources. “We need more resources if we want to be seriously engaged. You need to find a way to collaborate with other investors, say between four and seven – any more and it’s not possible to cooperate efficiently.” Johan Van der Ende, chief investment officer of PGGM, the €89bn pensions manager of the Pensioenfonds Zorg en Welzijn scheme for healthcare workers, said the fund is looking at ways to cooperate with other investors on voting via Eumedion, the Dutch corporate governance body. Responsible Investor recently revealed that the UK’s Universities Superannuation Scheme and Railpen, the UK pension funds for rail workers had created asimilar shareholder voting alliance. Van der Ende said Eumedion was also looking at ways major shareholders could be more involved as representatives on corporate boards, based on a model in Sweden. However, Van der Ende also acknowledged the resource intensity of engaged shareholder activity. He said that PGGM invests in 4,171 companies via its overall equities portfolio of approx €30 bn, of which 3% is managed through its more intense and fundamental responsible equity approach. The team managing equities recently expanded to nine members and 97% of its portfolio is managed by three portfolio managers and three corporate governance specialists. Van Der Ende said PGGM was also looking at whether it might take larger positions in the companies in its portfolio in order to better understand each stock. Paul Schneider, senior investment associate at the €63.7bn Ontario Teachers Pension Plan, said the fund was “just starting” engagement, but that it was becoming more complicated with the rise of environmental and social issues. He said Ontario would vote at about 800 company AGMs this year and noted that fund’s beneficiaries were “starting to make rumblings” about stepping up the funds terms of corporate engagement. In an interview with Responsible Investor, Christopher Ailman, chief investment officer of the $132.6bn (€99bn) California State Teachers’ Retirement System (CalSTRS), who was also at the IGCN conference, said he hoped the Obama

administration in the US would make financial reform its next focus in the wake of the healthcare bill. While in London, Ailman said he was meeting with global macro hedge funds for a new allocation of $200m: “We’re looking at global macro for the first time.” Ailman dubbed as “farcical” recent press coverage claiming that private equity firms were complaining that CalSTRS and its Californian peer fund CalPERS were working in tandem to fix lower fees for the asset class. Ailman also said he saw “a lot of sense” in making co-investments in overseas infrastructure investments with other institutions and suggested he would prefer to team upwith other major funds such as the Netherlands’ APG or PGGM to avoid CalSTRS being exposed as the ‘single foreign investor’ in projects. On voting collaboration, Ailman pointed out that different investors have different perspectives and objectives on issues such as climate change and corporate governance, which would make such alliances tricky. Ailman said CalSTRS, which has $500m invested in climate change strategies, had assigned one staff member from each asset class it invests in to look at the potential impact of climate change, which he said avoided creating a separate “sustainability” silo.