PRI in Person: Chicago Treasurer gives investment details of huge ESG move and launches $100m local impact fund

Back-testing of new strategy found returns unaffected.

The City of Chicago confirmed today that it had become the first City Treasury in the world to become a signatory of the PRI and outlined a new $100m local economic development fund – the Chicago Community Catalyst Fund – for investments in low- and moderate-income neighborhoods, which will be open to an additional $200-$300m in private-sector capital. Kurt Summers, Chicago City Treasurer, was addressing the PRI in Person conference in San Francisco.
Back in June, Summers told RI about Chicago’s plans to join PRI and integrate (ESG) issues into the management of its $8bn (€6.8bn) treasury assets,
At the time, he said that the city’s pension funds, with assets of $25bn, could follow suit once the investment case is made at Treasury level.
Summers said the fund would adopt a minimum ESG portfolio rating for its holdings in corporate securities and was also committing to achieve a carbon-neutral portfolio by the year 2020. He said this would involve proactively searching for green bonds to finance renewable energy projects, Ginnie Mae loans to finance affordable housing, and other socially responsible investment vehicles.In making the case for the responsible investment strategy, Summers said the Treasury’s investments team had examined over 800 sustainability factors, and arrived at just over 200 that it will focus on for scoring, including carbon emissions reduction, minimum wage, collective bargaining, internal pay equity, and female board representation. He said the Treasury had back-tested the resulting universe of ESG-friendly investments, which showed that investment returns were unaffected. 
But he flagged up a data hurdle that the Treasury was hoping to overcome in developing its ESG model: “The lack of data disclosure from companies continues to prevent us from making our model as holistic and comprehensive as possible. And it’s not just specific factors but also broader areas like human capital and social opportunities, where over 33% of companies fail to report, or corporate behavior, where over 50% of companies fail to report. Conquering the disclosure challenge is essential for us in Chicago – and for the entire responsible investing movement – to have a lasting and transformational influence.”