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The Markets December 17, 2013
High Marks for CalPERS on Climate Investing
The California Public Employees’ Retirement System (CalPERS) earned a “AAA” grade from the Asset Owners Disclosure Project (AODP).
Reported by John Manganaro
CalPERS is one of five organizations earning the top rating this year, clocking in at third best for sustainable investing among the world’s 1000 largest asset owners, as measured by the AODP. That’s a 12 place improvement over the retirement system’s 2012 ranking.
Organizations ranked ahead of CalPERS include the UK’s Environment Agency Pension Fund (no. 1 rank), and the Local Government Super fund, in Australia.
To assemble the list, the AODP conducts a survey of 50 multiple-choice questions covering the five main areas of a fund’s operations and investments. These include transparency, low-carbon investment, active ownership, risk management and investment chain alignment.
Data is sourced from public information, as well as disclosures that funds provide through the survey. The data is analyzed and ratings are applied to all funds. Respondents include pension, superannuation, insurance and sovereign wealth funds.
“Climate change poses both risks and opportunities for a long-term, global investor such as CalPERS,” says Anne Stausboll, CalPERS CEO. “The issues it raises are complex and challenging. Integrating climate change and sustainability into our new investment beliefs is a reflection of how seriously we take them.”
The improvement for CalPERS comes after the retirement system released a report in April of last year chronicling its efforts in sustainable investing (see “CalPERS Releases Report about Sustainable Investing Efforts”).
The report outlines CalPERS efforts to create a fiduciary framework that integrates sustainability across the pension fund’s $235 billion investment portfolio, and how the framework helps achieve long-term risk adjusted returns.
Like CalPERS, other large institutional investors have begun to include climate change considerations in future risk management or strategic asset allocation processes. In fact, a 2012 survey from Mercer found more than half of responding institutions have started to include climate change considerations in such processes.
About one-third of respondents have begun (or plan to) allocate more to “climate-sensitive assets,” and 80% have increased or plan to increase engagement on climate change with other companies and policy makers.
More on the AODP project and the CalPERS ranking is available here.