CalPERS has a long-standing commitment to sustainable investment and a proud history of leadership and innovation in the field. Acting as fiduciaries first and foremost, the goal of the CalPERS Investment Program is to achieve long-term, sustainable, risk-adjusted returns consistent with fiduciary duty. As a significant institutional investor with a long-term investment time horizon, sustainable investment means taking account of environmental, social, and governance (ESG) factors across all our day-to-day investment business.
In 2011, the CalPERS Board approved the adoption of a Total Fund process for integrating ESG issues as a strategic priority across CalPERS' portfolio. Grounded in the three forms of economic capital — financial, human, and physical — needed for long-term value creation, CalPERS developed strategic themes (Alignment of Interest, Human Capital, and Climate Change) that set the framework for the fund's ESG integration work. For more information, see CalPERS' 2014 sustainable investment report, Towards Sustainable Investment & Operations: Making Progress (PDF).
These documents outline the sustainable investment guidelines for integration of environmental, social, and governance (ESG) factors into the CalPERS Fund. ESG considerations are integrated into investment selection, contracting, and monitoring processes, which are subject to fiduciary principles. The guidelines integrate and supplement CalPERS' ESG 5 Year Strategic Plan (PDF), existing beliefs, principles and policies pertaining to ESG considerations, including CalPERS Investment Beliefs, Global Governance Principles (PDF), and United Nations-supported Principles for Responsible Investment (PRI). The guidelines are intended to evolve and adapt as industry best practices emerge.
The Sustainable Investment Research Initiative (SIRI) Library is a searchable database of over 700 academic studies on sustainability factors spanning four decades of research and which examine the impact of these factors on investment risk and return. There is a wide range of literature examining whether and how sustainability factors have an impact on risk and return for long-term investors like CalPERS. Our own discussions on this have highlighted the need for clarity on the definition of sustainability and its impact on investment risk and return across each asset class. In response, we launched SIRI and partnered with the UC Davis Graduate School of Management to conduct this review of evidence.