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November 12, 2010
CalSTRS Backs Off from Plan for Huge Commodities Investment
    by Robert Kropp

Decision follows expressions of concern by sustainable investors over effect of price volatility on world hunger.


The California State Teachers Retirement System (CalSTRS), the second-largest US public pension fund with $139 billion in assets under management, announced this week that it will invest $150 million in the commodities market. The amount to be invested represents a significant decrease from the fund's originally announced plan to invest $2.5 billion in the market, which includes raw materials such as agricultural products.

As reported in the
Wall Street Journal, Ricardo Duran, a spokesperson for CalSTRS, described the allocation as "mostly an investment driven decision."

However, as the
Interfaith Center on Corporate Responsibility (ICCR) reported in a press release, the decision by CalSTRS to reduce its investment in commodities came at a board meeting at which ICCR members spoke.

David Frenk of Better Markets, who represented the coalition of investors at the meeting, stated, "While not every board member agreed fully with every argument we made, there was sufficient concern among the board as a whole to drastically alter their original strategy."

In June, when CalSTRS announced its original plan, members of ICCR, led by the Maryknoll Sisters, sent a
letter to CalSTRS, describing their concerns over the effect of such a large investment on world food prices.

The letter from ICCR members stated, "We believe that large institutional investments in commodity futures markets have contributed to the excessively volatile prices in food and energy commodities in recent years and have detrimentally affected those markets."

"The global effects of the food and oil bubbles of 2008 were disastrous," the letter continued. "An additional 130 million people (UN estimate) were driven to hunger by the high food prices that year. In dozens of countries where chronic hunger is a long term reality, the situation grew so desperate that spontaneous food riots sprung out."

"We are convinced that institutional investments in commodity futures have interfered with the functioning of these important markets," the letter added.

Following CalSTRS' decision to reduce its investment in commodities, Kate Walsh of the
Tri-State Coalition for Responsible Investment said, "As faith-based and responsible investors who work directly with marginalized communities around the world, we take our participation in the global economy very seriously. We are encouraged that CalSTRS understood their responsibility, and are hopeful other investors will follow their example and think twice about commodity investments."

 

 
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