CalPERS CEO Marcie Frost said at Wednesday's board meeting that most of the fighting over ESG is for lack of a common definition.
When it comes to environmental, social and governance factors, "I frankly, don't believe people know what they're fighting about," Ms.Frost said.
As a result of an article CalPERS posted on explaining its approach to ESG and how it scrutinizes investments' risks and opportunities through an ESG lens, the $457.4 billion California Public Employees' Retirement System, Sacramento, received 615 messages from CalPERS members, she said.
"Many of them were unhappy with anything that might involve ESG, a phrase, again, that's widely used but also widely misunderstood," Ms. Frost said.
"Members also told us … to stop worrying about environmental issues and just focus on making money" and claimed that CalPERS is putting politics before profits, using its leverage to force companies to embrace a specific ideology, she said.
"Applying the lens of ESG is not a mandate for how to invest nor is an endorsement of a political position," Ms. Frost said. "It's still a bit disappointing to watch some political leaders continue to twist and bend the meaning of ESG into something that is unrecognizable to the investing world and frankly, the attempts to scare our members is highly inappropriate."
Misinformation can also lead to a lot of mistrust among CalPERS members, she added.
CalPERS uses ESG considerations to assess risk but also opportunities, Ms. Frost said.
CalPERS' investment staff is seeing ESG-related opportunities around climate strategies and renewable energy, mostly through its private capital portfolios, she said.
However, she said CalPERS may also start finding more opportunities in the public markets as CalPERS starts taking more active risk in the future, she said.
Indeed, at Monday's investment committee meeting, CalPERS CIO Nicole Musicco noted that 90% of CalPERS equity portfolio is in index oriented strategies and so was not "spared the brunt of the broad equity downturn we experienced in 2022. Although it did experience positive returns relative to our policy benchmark."
In general, active strategies overall outperformed their benchmarks in calendar year 2022, Ms. Mussico said.
"The impact of the outperformance was limited by the fact our active (equity) book is only 8% of our portfolio," she said.
She added that CalPERS should look to push more into actively managed investment strategies.