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California State Teachers' Retirement System CalSTRS

PRI reporting framework 2018

You are in Strategy and Governance » Investment policy

Investment policy

SG 01. RI policy and coverage

New selection options have been added to this indicator. Please review your prefilled responses carefully.

01.1. Indicate if you have an investment policy that covers your responsible investment approach.

01.2. Indicate the components/types and coverage of your policy.

Select all that apply

Policy components/types

Coverage by AUM

01.3. Indicate if the investment policy covers any of the following

01.3a CC. Describe how your products or investment strategy might be affected by the transition to a lower-carbon economy.

01.3b CC. Describe how climate-related risks and opportunities are factored into your investment strategies or products.

01.4. Describe your organisation’s investment principles and overall investment strategy, and how they consider ESG factors and real economy impact.

http://www.calstrs.com/sites/main/files/file-attachments/a_-_investment_policy_and_management_plan.pdf

Strategic asset allocation targets are established within a variety of sub-asset categories to achieve the identified performance objectives. In conjunction with the overall asset allocation targets, subasset class level tactical ranges provide flexibility to adapt to changing market conditions.

Subsequent to the establishment of strategic asset allocation targets, an investment structure was designed to guide and direct investment decisions. Investment related issues addressed included: A-2 1. The Funds’ overall investment objectives, risk tolerance, and performance standards 2. The relative amount of active and passive management within each asset class 3. The relative amount of internal and external management 4. The appropriate direct and indirect costs of each asset category 5. The appropriate reporting standards and time horizons

To help manage the risk of investing a global portfolio in a complex governance environment, CalSTRS has developed a series of procedures to follow when faced with any major governance and social issue as identified by the 21 risk factors.

01.5. Provide a brief description of the key elements, any variations or exceptions to your investment policy that covers your responsible investment approach. [Optional]

http://www.calstrs.com/sites/main/files/file-attachments/a_-_investment_policy_and_management_plan.pdf

 

As a significant investor with a very long-term investment horizon and expected life, the success of CalSTRS is linked to global economic growth and prosperity. Actions and activities that detract from the likelihood and potential of global growth are not in the long-term interests of the Fund. Therefore, consideration of environmental, social, and governance issues (ESG), as outlined by the CalSTRS 21 Risk Factors, are consistent with the Board fiduciary duties.


SG 02. Publicly available RI policy or guidance documents

New selection options have been added to this indicator. Please review your prefilled responses carefully.

02.1. Indicate which of your investment policy documents (if any) are publicly available. Provide a URL and an attachment of the document.

URL/Attachment

02.2. Indicate if any of your investment policy components are publicly available. Provide URL and an attachment of the document.

02.3. Indicate if your organisation’s investment principles, and overall investment strategy is publicly available

02.4. Additional information [Optional].

CalSTRS defines sustainability as the framework that governs our organizational business culture. Sustainable objectives are fully integrated into our everyday business practices at every level of our business operations.

From member services to investment strategy, our sustainable practices seek to create long-term value, promote stewardship of our natural resources and sustain the financial integrity of the fund for the benefit of our members and our community. We believe that establishing a corporate environment with sustainable values is a blueprint for better governance and increased profitability.

CalSTRS also recognizes that environmental, social and governance (ESG) issues, also known collectively as sustainability issues, affect the performance of the investment portfolio to varying degrees across companies, sectors, regions and asset classes. CalSTRS engages corporations, regulators, policy makers, and fellow investors on a variety of sustainability issues with the goal of increasing the level of awareness and importance that the global investment community places on sustainability considerations.

CalSTRS Green Initiative Task Force is an internally staffed team that incorporates all asset classes of the CalSTRS Investment Office. The mission of the Green Initiative Task Force is to manage the risks and capture the opportunities associated with climate change and other environmental issues by identifying environmentally focused investments and risk mitigation strategies intended to enhance the risk-adjusted returns of the overall CalSTRS portfolio.

CalSTRS has incorporated the PRI and other ESG principles into its investment policies and practices. Along with the PRI, CalSTRS works closely with organizations such as the Carbon Disclosure Project (CDP) and Ceres to improve the transparency and disclosure of environmental risk data by corporations


SG 03. Conflicts of interest

03.1. Indicate if your organisation has a policy on managing potential conflicts of interest in the investment process.

03.2. Describe your policy on managing potential conflicts of interest in the investment process.

Within the CalSTRS Teachers' Retirement Board (TRB) Policy Manual is a section titled Ethical and Fiduciary Conduct. This part of the TRB Policy Manual details what CalSTRS fiduciary duties are, what constitutes a prohibited transaction, the prohibitions against self-dealing, and the policy prohibiting insider trading. This section of the TRB Policy Manual also contains CalSTRS Statement of Ethical Conduct, which lists the activities or conducts that are inconsistent, incompatible, or in conflict with the duties and responsibilities of CalSTRS Board and staff.

The Ethical and Fiduciary Conduct language is required reading for all CalSTRS Board members and staff, and annual certifications of receipt and understanding of the policies contained therein is required. These policies are also presented to consultants and contractors upon commencement of a relationship with CalSTRS. Additionally, CalSTRS external managers must provide written confirmation that they have insider trading policies that, at a minimum, contain the same prohibitions as do the CalSTRS policies. External managers must also confirm that these policies are enforced.

Violations of the policies contained within the Ethical and Fiduciary Conduct section may result in disciplinary action, including dismissal of employees, and may result in termination of contracts for consultants, contractors and managers.

 

03.3. Additional information. [Optional]


SG 04. Identifying incidents occurring within portfolios

04.1. Indicate if your organisation has a process for identifying and managing incidents that occur within portfolio companies.

04.2. Describe your process on managing incidents

          When faced with a corporate decision that potentially violates CalSTRS Policies; the Investment
Staff, CIO and Investment Committee will undertake the following actions:
A. The CIO will assess the gravity of the situation both as an ESG risk and as to the
System. The extent of the responsibility of the System to devote resources to address
these issues will be determined by: 1) the number of shares held in the corporation, and
2) the gravity of the violation of CalSTRS Policies.
B. At the CIO’s direction, the Investment Staff will directly engage corporate
management to seek information and understanding of the corporate decision and its
ramifications on ESG issues.
C. The CIO and investment staff will provide a report to the Investment Committee of
the findings and recommend any further action of engagement or need to commit
further System resources. The Investment Committee can marshal further resources
given the gravity of the situation.
To assist CalSTRS Staff and external investment managers in their investment analysis and
decision-making, CalSTRS has developed a list of 21 risk factors that should be included
within the financial analysis of any investment decision.
        

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