The $152.9 billion California State Teachers Retirement System (CalSTRS) announced that it would be taking what CEO Jack Ehnes calls a “significant step” in its already broad sustainable investing program: From now on, all performance-related discussions that the pension giant has with its external managers will include an analysis of how environmental, social, and governance (ESG) issues factor into their strategies.

“What’s different now is that we’re saying, ‘No matter what you’re doing with us, there are ESG risks that we think will have a long-term impact on the portfolio, and we want to be sure that you’re articulating for us how you’re looking at them,’” Ehnes says. “We’re no longer just making the assumption that this is in their analysis.” ....

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