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California Public Employees' Retirement System CalPERS

PRI reporting framework 2019

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Governance and human resources

SG 07. RI roles and responsibilities

07.1. Indicate the internal and/or external roles used by your organisation, and indicate for each whether they have oversight and/or implementation responsibilities for responsible investment.

Roles

Select from the below internal roles

          Managing Investment Directors, Investment Directors
        

Other description (1)

          Legal Office - General Counsel/Litigation
        

Other description (2)

          Public Affairs,  Stakeholder Relations
        

07.2. For the roles for which you have RI oversight/accountability or implementation responsibilities, indicate how you execute these responsibilities.

Acknowledging sustainability impacts all areas of the portfolio, CalPERS seeks to ensure sustainable investment considerations are appropriately included throughout the life cycle of investments by internal and external managers. The Total Fund Governance and Sustainability Strategic Plan specifically seeks to integrate ESG factors into investment processes and decisions by internal and external managers. These processes include selection, contracting, monitoring and management.

The SIPGs are intended to evolve and adapt as industry best practices emerge, and as such were updated in 2017. They are now available and posted to CalPERS' website to ensure timely availability for interested parties.

CalPERS staff also integrated ESG factors into their Annual Program Review, with each asset class delivering such material to the Committee throughout 2018. Each asset class reports progress on responsible investment goals and sets new objectives as part of their annual review. Examples:

CalPERS 5-Year Total Fund Governance and Sustainability Strategic Plan includes key performance indicators which are tied to Investment Officer III and above compensation plans for the individuals that are implementing the strategic priorities of the plan.  

07.3. Indicate the number of dedicated responsible investment staff your organisation has.

22 Number

07.4. Additional information. [Optional]

14 full-time employees in the Sustainable Investment Program and 7 full-time employees in the Global Equity's Corporate Governance team focus on responsible investment.

An additional 10 staff are responsible for the oversight and implementation of ESG investment practices, including individuals from each asset class, and the Governance and Sustainability Subcommittee which includes the Legal Office, Legislative Affairs program, Investment Compliance and Operational Risk, Office of Public Affairs and Stakeholder Relations.

I confirm I have read and understood the Accountability tab for SG 07 I confirm I have read and understood the Accountability tab for SG 07

SG 07 CC. Climate-issues roles and responsibilities (Private)


SG 08. RI in performance management, reward and/or personal development

08.1. Indicate if your organisation’s performance management, reward and/or personal development processes have a responsible investment element.

Board members/Board of trustees

08.1b. RI in personal development and/or training plan

08.2. Describe any activities undertaken during the reporting year to develop and maintain Board members’ skills and knowledge in relation to responsible investment.

Board members have attended training at PRI, ICGN, CII, Pacific Pension Institute and receive annual training per policy requirements

Chief Executive Officer (CEO), Chief Investment Officer (CIO), Chief Operating Officer (COO), Investment Committee

08.1a. RI in objectives, appraisal and/or reward

08.1b. RI in personal development and/or training plan

Other C-level staff or head of department

          Managing Investment Directors, Investment Directors
        

08.1a. RI in objectives, appraisal and/or reward

08.1b. RI in personal development and/or training plan

Portfolio managers

08.1a. RI in objectives, appraisal and/or reward

08.1b. RI in personal development and/or training plan

Investment analysts

08.1a. RI in objectives, appraisal and/or reward

08.1b. RI in personal development and/or training plan

Dedicated responsible investment staff

08.1a. RI in objectives, appraisal and/or reward

08.1b. RI in personal development and/or training plan

Other role (1) [from SG 07]

          Legal Office - General Counsel/Litigation
        

08.1a. RI in objectives, appraisal and/or reward

08.1b. RI in personal development and/or training plan

Other role (2) [from SG 07]

          Office of Public Affairs
        

08.1a. RI in objectives, appraisal and/or reward

08.1b. RI in personal development and/or training plan

08.3. Provide any additional information on your organisation’s performance management, reward and/or personal development processes in relation to responsible investment.

CalPERS evaluates and rewards staff in the following ways:

Incentive Scheme

Incentive schemes are underpinned by the Investment Beliefs, which includes recognizing that long-term value creation requires the effective management of three forms of capital: financial, physical and human.

CalPERS staff undergo annual performance reviews and performance is evaluated based on quantitative and/or qualitative performance measures. CalPERS financial incentive scheme includes ESG-related KPIs for the entire Investment Office senior staff, including the Chief Investment Officer (CIO).

Awards

The Achieving CalPERS Excellence (ACE) Award serves to recognize individuals and teams who demonstrate excellence in communication, core values, customer service, or as a champion of security.

CalPERS APEX award is the pinnacle of our employee recognition program for adminstration and junior staff. This unique, peer driven, formal award program enables all levels of to nominate and select the APEX recipients (with Investment Officer IIIs and above excluded) who demonstrate our core values and commitment to customer service principles; exhibit exceptional technical and interpersonal skills; and display a commitment to the overall success of CalPERS.

CalPERS Core Values

Our Core Values guide us in our work and are woven into the fabric of our daily interactions with our members, our employers and each other. CalPERS Core Values are the following:

Quality

Strives to exceed customers' needs and expectations through competence, innovation, and teamwork Proactively explores policy and product opportunities to better serve our customers Seeks to "do it right" the first time Considers, understands, and manages risk

Respect

Treats every person with kindness and humility Values and recognizes every individual for their unique skills, talents, and contributions. Stays present in the moment and actively listens to understand others Is courteous, responsive, and professional

Accountablity

Takes ownership of, and responsibility for, actions, risks, and results and uses outcomes as learning opportunities. Makes sound decisions from experience, good judgment, and collaboration. Gives and seeks clear expectations. Finds solutions that contribute to desired result

Integrity

Acts in all endeavors with an ethical, honest mindset, and in a professional manner. Honors commitments, keeps promises, and builds trust Is truthful in all actions and communications

Openness

Approaches every situation with good intentions Is receptive to new and diverse ideas. Listens, cooperates, and shares across the organization. Encourages a trusting environment by being genuine and transparent in actions and communications

Balance

Supports a healthy personal and professional balance. Maintains focus on long-term goals while meeting short-term needs. Embraces opportunities for personal and professional development. Supports an environment that is optimistic and enjoyable in which relationships can prosper across our organization and communities

08.4. Describe the level of experience board members/trustees/chief-level staff have with incorporating ESG factors into investment decision-making processes.

          In 2016, each asset class developed and piloted a set of Sustainable Investment Practice Guidelines (SIPGs) which reflected their particular asset class' investment approach and requirements. The guidelines were approved by chief-level staff and presented to the Board members in 2015 and 2017. The SIPGs are intended to evolve and adapt as industry best practices emerge, and as such were updated in 2017. They are now available and posted to CalPERS' website to ensure timely availability for interested parties. https://www.calpers.ca.gov/page/investments/governance/sustainable-investments-program
•	Global Equity Sustainable Investment Practice Guidelines: https://www.calpers.ca.gov/docs/global-equity-sustainable-investment-guidelines.pdf  
•	Global Fixed Income Sustainable Investment Practice Guidelines: https://www.calpers.ca.gov/docs/global-fixed-income-sustainable-investment-guidelines.pdf 
•	Private Equity Sustainable Investment Practice Guidelines: https://www.calpers.ca.gov/docs/private-equity-sustainable-investment-guidelines.pdf
•	Real Assets Sustainable Investment Practice Guidelines: https://www.calpers.ca.gov/docs/real-assets-sustainable-investment-guidelines.pdf

CalPERS staff also integrated ESG factors into their Annual Program Review, with each asset class delivering such material to the Committee throughout 2017. Highlights included:
•	Global Fixed Income: Completed Carbon Footprint of Internal Corporate Fixed Income portfolios; including Governance factors across credit portfolio
•	Global Equity: Completed the review of ESG strategies
•	Real Assets: Launched the Energy Optimization Initiative to research strategies to optimize energy consumption of the real estate portfolio
•	Private Equity: Staff focused on broader adoption of the ILPA Fee and Profit Sharing template

In 2017-18, CalPERS' staff researched industry best practices, performed outreach to external managers to understand how the SIPGs are being utilized, refined internal processes, and developed a framework to measure and report on the percentage of external strategic managers with policies and procedures integrating ESG into investment processes and decisions. Staff determined 96% of managers incorporate ESG practices in their investment processes, representing approximately 81% of CalPERS externally managed portfolio NAV. Additionally, this measure has been approved as a Strategic Measure within the CalPERS 2017-2022 Strategic Plan specific to Fund Sustainability, and is reported on quarterly in the CalPERS' Strategic Plan update to the CalPERS' Board. https://www.calpers.ca.gov/docs/board-agendas/201809/full/item10a-0c_a.pdf
        

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