CalPERS Unveils ESG Study, Research Competition

The relationship between sustainability factors and financial performance is a never-ending debate--and CalPERS will soon be fueling it.

(January 28, 2013) — The California Public Employees’ Retirement System (CalPERS), the largest public pension fund in the US with assets totaling $251 billion, has unfolded a sustainable investment research initiative with an eye toward helping pension funds understand the impact of sustainability factors on financial performance.

“CalPERS has made it a priority to use sustainability factors in making investment decisions across our Fund,” said Anne Simpson, CalPERS senior portfolio manager and director of global governance. “This initiative will aid us in our application, and help us draw conclusions that can inform our investment strategy and beliefs.”

Steven Currall, dean of the UC Davis Graduate School of Management, added in a statement: “We look forward to working with CalPERS on this path breaking research to provide an independent analysis to better understand the potential impact of ESG issues on capital markets, companies and intermediaries in the investment chain. This project is both theoretical and practical.”

As outlined by the pension fund, there is a lack of global consensus on how environmental, social, and governance (ESG) factor influence investment risk and return across asset classes in current scholarship and in the investment world. Those ESG factors range from climate change, labor practices, and human rights, to executive compensation.

In 2011, the CalPERS Board approved integrating ESG issues as a strategic priority across its investment portfolio. As outlined by the pension fund’s 2012 report titled “Towards Sustainable Investment,” ESG is grounded in the three forms of economic capital–financial, human and physical–that are needed for long-term value creation.

According to a statement by the fund, the research initiative also marks the start of a call for working papers from scholars and investment practitioners globally in the fields of finance, economics, accounting, law and business. The papers will contribute to a rigorous debate and discussion on the impact of ESG issues on long-term value creation and capital market stability. CalPERS will partner with the UC Davis Graduate School of Management to seek, collect and review the papers.

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