US pension giants make massive ESG commitments

Funds collaborate with business groups in new sustainable economy roundtable

CalPERS and CalSTRS, the giant California pension funds, today made sweeping commitments towards integrating environmental, social and governance (ESG) factors into their investment processes.

It came as the funds helped launch the groundbreaking Investor-Business Roundtable for a Sustainable Economy at the Ceres conference.

The California Public Employees’ Retirement System, the largest US pension fund at $236bn (€165bn), said it has committed to fully integrating ESG factors in all its investment decision-making across all asset classes. “This reflects our belief that a deep understanding of sustainability issues is critical in achieving successful long-term investments results,” said CalPERS’ CEO Anne Stausboll.

And the $152.9bn California State Teachers Retirement System said it would accelerate a program for its external asset managers to integrate sustainability and ESG into their decision-making.

“It is vitally important for our investment managers and partners to identify and address ESG risks in order to help build a strong and sustainable global economy,” said CalSTRS CEO Jack Ehnes. Furthermore, CalPERS will use Ceres’ Sustainability Roadmap for its company engagement work, including its Focus List program.

The new nine-member Investor-Business Roundtable comprises the two funds along with labour group AFLCIO, Al Gore’s Generation Investment Management, real estate giant Jones Lang LaSalle, clothing firm Levi Strauss & Co., utility Pacific Gas & Electric, software firm SAP and the philanthropic Skoll Foundation.“As investor and business leaders, we jointly commit to develop and accelerate solutions and accountability that make sustainability a core foundation of the 21st century global economy,” says its mission statement “Catalyzing a Sustainable Economy: The Need for Investor and Business Leadership”.
The statement says asset owners can take action in the capital markets by integrating sustainability across all asset classes and require their asset managers to account for these factors.

“Making sustainability a core foundation of the 21st century global economy”

Stausboll, in a speech to the conference, said: “Policies can point out a direction, but only companies and investors can take us to our desired destination of a truly sustainable economy.”
She said far-sighted businesses and investors see enormous opportunities with “transformative ideas that profitably address carbon pollution, resource constraints, and other sustainability threats”.

“It’s a trillion dollar investment just waiting to happen!”

The roundtable’s statement calls on asset managers to “offer more products that address these issues” – and calls on asset owners to increase their investments in them.

And businesses should provide “comparable quantitative and qualitative” material information on sustainability risks, opportunities and performance that can be used by investors.