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May 21, 2011
CalSTRS To Include ESG in Discussions with Asset Managers
    by Robert Kropp

At the Ceres Conference 2011, the pension fund announces that all performance-based discussions with its external managers will include how they are incorporating environmental, social, and corporate governance (ESG) factors into investment strategies.


In yesterday's SocialFunds.com article, it was reported that the California Public Employees' Retirement System (CalPERS), the nation's largest public pension fund, will integrate environmental, social, and corporate governance (ESG) considerations into investment decision-making across all asset classes.

The announcement, which was made by CEO Anne Stausboll at last week's Ceres Conference 2011, was a result of a Roundtable convened by Ceres, at which representatives of corporations, pension funds, labor organizations, and foundations made specific commitments to advancing the role of sustainability.

Also involved in the Roundtable was the California State Teachers' Retirement System (CalSTRS), the largest teacher pension fund in the US. CalSTRS announced at the Ceres conference that its discussions with external managers will include an analysis of how environmental, social, and corporate governance (ESG) considerations are included in their investment decision-making strategies.

In a statement, the Roundtable participants said that requiring asset managers to account for sustainability factors, and having them offer more products that address sustainability issues, "will allow substantially larger investments to flow to companies that are leveraging sustainability challenges into increased revenues, profitability and long-term competitive advantage."

"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," stated CalSTRS CEO Jack Ehnes.

A 2009 survey conducted by the Social Investment Forum (SIF) found that while 90% of investment consultants expect client interest in ESG issues to continue to grow, only 22% proactively raise the issue of ESG integration with their clients.

In a groundbreaking report known as Fiduciary II, published in 2009, the Asset Management Working Group (AMWG) of the United Nations Environment Program Finance Initiative (UNEP FI) stated, "Advisors to institutional investors have a duty to proactively raise ESG issues within the advice that they provide, and that a responsible investment option should be the default position."

Furthermore, the report continued, investment advisors that fail to incorporate ESG issues into their investment services face "a very real risk that they will be sued for negligence."

 

 
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