CalPERS: Carbon Disclosure Will Be “Critical” Element of Investment Decision-Making Process

CalPERS officials said earlier this year that ESG factors would soon play a much larger role in the fund’s investment strategy, both for making in-house investments and for hiring outside managers.

At a UN conference this week, CalPERS senior portfolio manager Anne Simpson further explained how the fund is putting ESG principles in practice, and why its pushing companies to disclose their carbon footprints.

From Top1000Funds:

Simpson urges asset owners to push expectations among their managers, internally and externally.

Managers need to develop and use methodologies that incorporate a companies’ environmental practices.

Asset owners should requests data and modeling in their manager contracts and catalyze the change, she says. She urges for much more expertise in the area from managers.

[…]

However Simpson says a lack of underlying corporate information means CalPERS has to rely on proxy estimates to measure the carbon footprint of many of the companies in which it invests.

“We can’t model out of thin air. We need the information,” she says, arguing that carbon disclosure become a necessary part of corporate reporting for the investment community.

Raising industry awareness of the need for emissions disclosure is a first step.

“The first part of our work is around advocacy. We need a policy framework that will price in this externality. We need to be advocates for market reforms which will price this risk in a better way.”

CalPERS is the largest pension fund in the United States, and manages over $300 billion in assets.

Photo by  Paul Falardeau via Flickr CC License