This report shows public data only. Is this your organisation? If so, login here to view your full report.

California Public Employees' Retirement System CalPERS

PRI reporting framework 2019

Export Public Responses
Pdf-img

You are in Indirect – Manager Selection, Appointment and Monitoring » Outputs and outcomes

Outputs and outcomes

SAM 08. Percentage of externally managed assets managed by PRI signatories

08.1. Describe how you ensure that best RI practice is applied to managing your assets

Measures

          2018 marked the second year both Real Estate and Infrastructure managers participated in the GRESB annual survey
Real Estate Managers representing $25.9 Billion (or 82% of Real Estate's Portfolio NAV) completed GRESB submissions, up from 78% in the prior year.
Infrastructure Managers representing $2.8 Billion (or 64% of Infrastructure's Portfolio NAV) completed GRESB submissions, up from 56% in the prior year.
Taken together, the Infrastructure and Real Estate submissions (covering the 2018 year) represents 80% of the combined Real Estate and Infrastructure NAV, up from 75% in the prior year.
        

08.2. Additional information. [Optional]

CalPERS Global Equity staff renegotiated contract guidelines to include language related to the integration of ESG considerations into the investment decision-making process. The additional language also requires managers to participate in annual discussions with Global Equity staff on the results of integration.  Additionally, staff provides copies of CalPERS Global Principles and Investment Beliefs and required our external managers to consider the Principles and Beliefs when making investment decisions.

CalPERS has a deep interest in the condition of workers employed by CalPERS and investment managers at its Real Estate and Infrastructure investments. CalPERS, through the Responsible Contractor Program (RCP) Policy, supports and encourages fair wages and benefits for workers employed by its contractors and subcontractors, subject to fiduciary principles. CalPERS believes that an adequately compensated and trained worker delivers a higher quality product and service. The RCP Policy applies to all domestic Real Estate and Infrastructure investment managers, joint ventures, and partnerships where CalPERS has greater than 50% ownership interest and the standards of the RCP Policy are met.

CalPERS provided an update to the Sustainable Investment Practice Guidelines and CalPERS Principles that encourage external managers to develop an ESG policy and integrate ESG considerations into its investment decision-making process.

Asset Class Sustainable Investment Guidelines:

CalPERS Principles: https://www.calpers.ca.gov/page/investments/about-investment-office/policies  


SAM 09. Examples of ESG issues in selection, appointment and monitoring processes

09.1. Provide examples of how ESG issues have been addressed in the manager selection, appointment and/or monitoring process for your organisation during the reporting year.

Topic or issue
          Monitoring Example: GRESB Real Estate (Property) and Infrastructure
        
Conducted by
Asset class
Scope and process

2018 marked the second year both Real Estate and Infrastructure managers participated in the GRESB annual survey.  Real Estate managers representing $25.9 Billion (or 82% of RE Portfolio NAV) completed GRESB submissions, up from 78% in the prior year.  Infrastructure managers representing $2.8 Billion (or 64% of Infra Portfolio NAV) completed GRESB submissions, up from 56% in the prior year. Taken together, the Infrastructure and Real Estate submissions (covering the 2018 year) represents 80% of the combined Real Estate and Infrastructure NAV, up from 75% in the prior year.

 

Outcomes

The GRESB reports provide greater insights into the ESG policies and practices of CalPERS Real Estate and Infrastructure managers and assets. The GRESB KPIs also provide insights into the resource intensity and opportunities for improvements in the portfolio's energy, water and waste use.  Staff has been able to use the reports for productive dialogue and engagement with external managers on areas for improvement.

Topic or issue
          ESG Underwriting/Diligence Tool - Utilized in Real Estate (Property) and Infrastructure
        
Conducted by
Asset class
Scope and process

Managers receiving new allocation as a result of CalPERS Annual Investment Planning process were required to complete an ESG Consideration Matrix as a part of due diligence for new acquisitions. In 2018, managers were required to submit an ESG Consideration Matrix to CalPERS before entering into binding contracts for regions with elevated climate risks in the United States.

Outcomes

This tool provides a systematic process for ensuring ESG factors are considered when underwriting new acquisitions.  The ESG Consideration Matrix informs staff of ESG risks and opportunities that were identified during due diligence that can be monitored over time and ensures managers are considering ESG factors during the anticipated hold period (and incorporating risks and opportunities into financial modeling if quantifiable).

Topic or issue
          ESG Issues Addressed During Manager Selection / Appointment in Real Assets
        
Conducted by
Asset class
Scope and process

ESG is a key aspect of our underwriting analysis. Any material ESG issue identified during the underwriting phase that is not addressed prior to closing nor has a clear remediation plan likely results in not selecting the manager. CalPERS negotiates strict reporting obligations and investment guidelines to limit the risk of potential ESG issues arising in the future.

 


 

Outcomes


CalPERS reviewed managers' policies, procedures and general approach to ESG as well as track records. The managers confirmed their commitment to report into GRESB, comply with CalPERS’ policies (Responsible Contractor Program Policy, etc.) and provide the CalPERS ESG Consideration Matrix when underwriting investments.

Topic or issue
          Governance: Transparency of fees charged to the portfolio companies (Private Equity)
        
Conducted by
Asset class
Scope and process

In collaboration with ILPA, developed the ILPA Fee Reporting Template (the “Template”) that has detailed information on fees charged to portfolio companies

Outcomes

The Template is now a reporting requirement for any new investment. The number of GP filling out the Template has been consistently growing

Topic or issue
          Review GPs’ approach to ESG across the entire PE portfolio (GP ESG Survey)
        
Conducted by
Asset class
Scope and process

During the period, PE Staff conducted an ESG Survey across all PE managers, inquiring about the GP’s ESG Policy, dedicated ESG staff, ESG reporting, and whether the PE firm was a signatory to either UNPRI or AIC.

 

Outcomes

Staff received responses from 100% of the PE managers. The findings allowed for a deeper understanding of the general approach to ESG in the portfolio, as well as for a continued dialogue with the strategic managers

 

 

Topic or issue
          Appointment of Listed Equity external managers
        
Conducted by
Asset class
Scope and process

After managers have been identified for funding, staff negotiates specific contract terms to encourage managers to integrate ESG characteristics

Outcomes

Global Equity seeks to promote greater alignment with its external managers by establishing, where relevant, the following items in contracts:

  • Manager have or will commit to have, an investment process which incorporates an assessment of relevant long-term Sustainable Investment or ESG factors; 
  • Managers will incorporate relevant ESG factors and Sustainable Investment activities into reporting; and
  • Managers commit to working with staff to understand and incorporate appropriate CalPERS Global Governance Principles and, where appropriate, CalPERS Investment Beliefs. 
Topic or issue
          Monitoring of Listed Equity external managers
        
Conducted by
Asset class
Scope and process

General oversight of external managers

Outcomes

Global Equity annually reviews ESG-related issues and reports as part of its monitoring protocol in the following ways:

  • Staff investigates the Manager's process for identifying and acting on ESG-related opportunities and risks; 
  • New or ongoing litigation issues pertaining to ESG; and 
  • Material ESG issues that may impact the value of the portfolio

Staff ensures Managers comply with CalPERS' Principles. As per our Governance and Sustainability Principles, “CalPERS expects all internal and external managers of CalPERS capital to integrate the Principles into investment decision making, including proxy voting, consistent with CalPERS’ fiduciary duty to seek the highest possible returns at an acceptable level of risk to fulfill our pension obligations”.

09.2. Additional information.


Top