Long a champion of looking at environmental factors in investing, CalSTRS has become the first major U.S. public pension fund to join the Enhanced Analytics Initiative.
EAI is an international group of pension funds and managers aimed at encouraging investment research that considers the effect on corporate performance of long-term factors not used in traditional fundamental analysis, such as climate change, corporate governance, employment standards and executive pay.
Other institutions that belong to the network include Dutch pension funds ABP and PGGM, the BT Pension Scheme, Hermes Pensions Management Ltd., CPP Investment Board, Investec Asset Management, Robeco Group and the Universities Superannuation Scheme Ltd.
"CalSTRS has long advocated, both to regulators such as the SEC and investment managers and securities analysts, for increased disclosure and analysis on material risks such as climate change," said Christopher J. Ailman, chief investment officer of the $156 billion California State Teachers' Retirement System, Sacramento, in a news release.
"We see that integration of sustainability and mainstream asset management is going to be a dominating theme. Thus, it's essential that research on any investment opportunity should include consideration of any ESG (environmental, social and corporate governance) issues," said Erik Breen, vice president for sustainability at Rotterdam-based Robeco. The manager has allocated at least 5% of its commissions to brokers that do such research.
Jennifer Walmsley, associate director at Hermes Pension Management, London, said some niche brokers provide research on long-term issues. The initiative hopes to encourage mainstream brokers to study these issues in addition to their traditional fundamental research, she said.