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.”
CalSTRS’s announcement is part of a broad set of commitments issued by the participants of the Investor-Business Roundtable for a Sustainable Economy, a group of prominent investors, companies and labor unions brought together by Boston-based Ceres, a coalition of investors and public interest groups. The Roundtable participants first met late last year to discuss specific ways that each of them could contribute to the development of a more stable economy. The announcements coincide with the first day of the 2011 Ceres Conference in Oakland, California.
Another major announcement came from the California State Employees Retirement System (CalPERS), the nation’s largest public pension fund with $236 billion under management. CalPERS’ CEO, Anne Stausboll, pledged that the behemoth pension plan would fully integrate ESG factors in all investment decisions, and across all asset classes. The corporations involved in the Roundtable include apparel manufacturer Levi Strauss & Co, which stated that it would launch an effort to improve factory conditions for its suppliers and across its supply chain.
CalSTRS’s Ehnes says that the conversations he hears on the topic of sustainability have morphed in the decade since he started hearing them, and the industry-, company- and investor-specific commitments announced at today’s conference appear to underscore his point.
“You can tell that people are not just there to talk about sustainability, but to figure out strategies that really will affect change,” he says. “As I’ve witnessed this over 10 years, I can really tell the difference in the tone of conversation from education and networking to trying to develop specific action plans of steps they can take.”