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INVESTING/PORTFOLIO STRATEGIES

CalPERS starts process of revamping ESG plan

John Chiang
California Treasurer John Chiang

CalPERS' investment committee plans to vote on a new ESG plan for engaging its external managers and public companies in which it invests by August.

The disclosure came Tuesday at the CalPERS board's annual winter retreat meeting in Monterey, Calif. CalPERS has been at the forefront of environmental, social and governance practices for more than two decades, but California Treasurer John Chiang, an ex-officio member of the CalPERS board, said the $280.2 billion pension fund needs a new plan to better engage portfolio companies over climate change and other environmental issues.

“The process we started today will allow CalPERS to establish priorities about which issues to best focus on and how to best allocate resources,” spokesman Joe DeAnda said in an interview. Members of the California Public Employees' Retirement System's investment staff discussed at the meeting how ESG is being integrated into the investment process. In many cases, the efforts are still in the beginning stages, but members of the real estate, private equity, fixed income and equity investment teams all said they are surveying external managers as to how they integrate ESG into the investment process.

The private equity portfolio team members also stated the extent to which private equity companies use ESG factors in assessing portfolio companies is playing a role in determining which firms are hired by Sacramento-based CalPERS.

Jane Ambachtsheer, partner and global head of responsible investment at consultant Mercer, who spoke at the meeting via teleconference, said ESG integration by investment managers is still at the beginning stages. She said Mercer rates more than 5,500 different investment strategies, but only 12% have a high rating from the firm in terms of ESG integration.