All passive strategies are managed internally.
Global Equity reviews companies that present ESG risks and opportunities identified by CalPERS Principles, legislative mandate, and Board decisions and applies the following framework:
- Issue Prioritization – materiality, exposure, and expertise
- Portfolio Screens – screen universe of holdings based on issue prioritization findings
- Engagement Decision – staff determines most effective approach to maximize the risk-return benefit to the Aggregate Portfolio
These companies will either be engaged to seek a decrease in risk factors, or based on Board direction excluded from the policy benchmark (divestment approach).
Global Equity staff actively votes all proxies based on CalPERS Principles.
CalPERS Global Equity asset class has many portfolios with distinct strategies. We have exclusions at the Global Equity level that cover all portfolios as well as emerging strategies that have exclusionary screens. Our overarching exclusions are:
Tobacco-related securities – Divestment
Iran – companies in the international nuclear, defense, oil and gas sectors; Divestment
Sudan – companies with business activities, unless exempt on humanitarian grounds; Divestment
Assault Weapon Manufacturers – manufacturers of assault weapons that are illegal for sale in California; Divestment
Thermal Coal – coal companies that generate 50% or more of their revenue from mining thermal coal; Divestment
Integration - CalPERS requires external investment managers to adhere to our Governance and Sustainability Principles, which incorporate responsible investing attributes. Many managers' processes incorporate systematic and explicit inclusion of environmental, social and governance factors into traditional financial analysis. The information is used to appropriately price ESG risks and opportunities in support of the investment decision.
In addition, as part of our Manager Expectation initiative, each asset class developed a set of draft Sustainable Investment Practice guidelines, which reflect their particular strategies. The guidelines utilized common governance elements applied across the Total Fund, such as CalPERS Principles & Beliefs. The object was to ensure that sustainable investment considerations were appropriately included throughout the life cycle of investments by internal and external managers, including: selection, contracting, monitoring, and management.
Fixed Income: CalPERS' Global Fixed Income team actively manages approximately $75bn in fixed income assets which is 93% managed internally and 7% by external managers. These fixed income assets are segmented across the Government, Securitized and Corporate bond markets.