2018 Knowledge Brokers New Guards

Mika Buffington Malone

Looking back at her 15 years at Meketa Investment Group, Managing Principal Mika Malone sees a particularly notable trend: CIOs’ and pension funds’ ever-increasing interest in environmental, social and governance (ESG) concerns. “It’s one of the most hotly debated topics right now,” she says.

Meketa, an investment advisory and consulting firm with $640 billion in assets under advisement, works primarily with public and private pension plans, as well as endowments, foundations, and family offices. Malone, who is based out of Portland, Oregon, works with West Coast-based clients that include the California State Teachers’ Retirement System (CalSTRS) and the State of Wyoming’s pension plan. She focuses on such areas as investment policy and asset allocation, in addition to manager selection, by tapping the firm’s research team.

When it comes to ESG considerations, Malone’s clients are asking more frequently to have the issue included into investment belief statements—documents attached to the organization’s investment policies that lay out anywhere from three to 20 core beliefs.  “It helps boards figure out what is important, with a set of basic principles to invest by,” says Malone, who has written such statements for several clients over the last two years. Those documents might include something on the prosaic side, like a belief in the value of active management. But they also increasingly cover a definition of ESG investing and the role it should play in their portfolios.

At the same time, while it’s a hot area, clients sometimes aren’t willing to take that final leap. “They often stop short of wanting to make statements about believing ESG will necessarily add value to the bottom line,” she says.

According to Malone, this stepped-up focus also is connected to another prevalent interest: ensuring that clients’ boards and staffs, as well as those at their investment managers, are diverse. “That’s a little bit harder,” she says. “It means looking at inclusion and equity and how they’re integrated into a firm.”

Additionally, Malone sees clients worrying about risk. That means analyzing when a downturn could happen and how that should affect their portfolio planning over the next decade. She’s increasingly found a new tool in her toolbox to be helpful—conducting anonymous surveys of board members and, when appropriate, staff, to get a better understanding of each person’s values and knowledge. The anonymity allows clients to be more forthcoming than they might otherwise be.

Most important, the results help Malone pinpoint where there’s a knowledge gap. For example, after going through an asset allocation review, she’s found that, although she might have described a worst-case scenario as being in the range of a 25% loss, anonymous survey responses revealed a significant share of respondents thought the worst case was perhaps minus 5%. She can then provide more education about realistic expectations by using new graphics or approaching the numbers in a different way.

Case in point: A year ago, she and staff created and conducted a survey with one public pension after discussing the projections for downside risk in asset allocation. Then, in the next round of asset allocation review, she spent time presenting visuals and other representations of her report to focus on downside risk expectations. When they surveyed the board again recently, they found that their understanding had improved dramatically. “It was a really good sign we had broken through and were working together with the same view of the data,” she says.

By Anne Field

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