CalPERS: ESG Factors to Play Bigger Role In Manager Hiring, Evaluation

Investment managers working with CalPERS will soon have to follow a series of ESG-focused guidelines and expectations, according to a new report from Top1000Funds.

All managers will have to articulate how ESG factors figure into their investment strategies, and ESG will play a bigger role in hiring of new managers as well as evaluation of current managers.

Reported by Amanda White at Top1000Funds:

CalPERS staff led by Anne Simpson, senior portfolio manager and director of global governance, presented the ESG manager expectations, and draft sustainable investment guidelines, to the investment committee this week.

The $307 billion fund will factor into its decisions about hiring and monitoring external investment managers the degree to which managers assess ESG factors and integrate them into their process.

“If for example a manager hasn’t addressed how to carry out an environmental impact, if that can be easily integrated, that will affect our decision,” Simpson says.

“This is going beyond asking are you a signatory to the PRI? It lifts the lid, as they have to report to us on this.”

In an exclusive interview with www.top1000funds.com, Simpson said that CalPERS considers managers that do not identify and manage these risks as having a “sub-par investment process”.

The purpose of the project, which has been two-years in the making, is to integrate ESG risk and opportunity considerations into the investment processes and decision making across the total fund at the same time CalPERS wishes to recognise the complexity and differences across asset class strategies.

CalPERS manages $307 billion in assets. Read the full report here.

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