CalSTRS' investment committee meeting reviewed a possible new asset allocation but will not vote on whether to adopt the proposal until its November meeting, said committee Chairman Harry M. Keiley at the outset of Wednesday's meeting.
The proposed new asset allocation would boost real estate and inflation sensitive assets by 2 percentage points each to 15% and 6%, respectively. Risk-mitigation strategies would increase by 1 percentage point to 10%. The increases would come out of the pension fund’s global equity allocation, which would drop by 5 percentage points to 42%. Left unchanged would be private equity at 13%, fixed income at 12% and cash/liquidity at 2%.
The investment committee of the $241.3 billion California State Teachers' Retirement System, West Sacramento, did approve revisions to its corporate governance program and policy to reflect the duties of its strategic relations management team. That strategic relations management team, now renamed the stakeholder engagement team, responds to investment-related stakeholder requests concerning corporate governance as well as environmental, social and governance, and sustainable investment issues.
The strategic relations management team is being combined with the sustainable investment and stewardship strategies team, which is responsible for, among other things, for overseeing CalSTRS' sustainable investments portfolio. The policy now provides that to mitigate reputational risks, including those related to ESG issues, by managing relations within CalSTRS' investment branch and external stakeholders to promote the portfolio's sustainability.
In November, the investment committee is expected to review the team's annual engagement plan, to use its status as a global investor to influence sustainable business practices, said Kirsty Jenkinson, director of sustainable investment and stewardship strategies, who joined CalSTRS in January.
Ms. Jenkinson said her team has been developing a strategic plan to make the pension fund a catalyst, because of its size, for financial markets to appropriately value and integrate sustainability and ESG considerations, including its focus on a low-carbon transition. In an increasingly crowded and resource-constrained world, ESG and sustainability factors are going to influence the pension fund's long-term return, she said.
She added that part of its work will be to help to reshape CalSTRS' corporate governance investment portfolio to include investing in new transformational approaches to sustainable investments, along with its current investments in activist managers and sustainable managers — equity managers that take ESG considerations into account in portfolio construction and management.