How California’s Asset Pension System Uses Investments To Agitate for Social Change
Tuesday, August 4, 2015
Families with a taste for social-impact investing—the art of actively leveraging profit-seeking investments for the greater good—can learn a lot from the California Public Employees’ Retirement System, or Calpers, the state’s $305-billion-asset pension system.
Earlier this year, the nation’s largest pension fund quietly told its 400 member in-house asset-management team and 212 external fund managers that they had to articulate precisely how environmental, social, and governance risks were assessed and factored into their investment process. The fund managers have until May 2016 to report back. Those who cannot adequately demonstrate how these factors filter into their due diligence will be labeled as having a “subpar investment process,” says Anne Simpson, a Calpers senior portfolio manager who is leading the so-called ESG effort.
Calpers invests in oil companies, but then demands that the firms deal with a 30-year transition to cleaner energy. Why the hard-nosed stand? “Because of our size and geographic exposure, there’s nowhere for us to hide,” Simpson says, which is why Calpers defines risk differently than most investors. The pension fund invests across 47 markets, with $30 billion alone invested in real estate, forestry, and infrastructure projects across the globe. For these investments, projections of higher water levels, rising temperatures, and escalating damage related to natural disasters directly expose Calpers to risk.
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