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California Public Employees' Retirement System CalPERS

PRI reporting framework 2019

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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

          Advocacy
        
          ESG Integration
        

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

Other description (1) ESG Integration: CalPERS' Board approved the Total Fund Governance and Sustainability Strategic Plan, which includes objectives and KPIs designed to integrate ESG risk and opportunity considerations into investment processes and decisions.
Other description (2) Engagement and Advocacy: As outlined in the Total Fund Investment Policy, CalPERS' Investment Beliefs recognize a long-term investment horizon is both an advantage and imposes a responsibility, requiring CalPERS advocate for policies which support the long-term with policy makers, companies, and investment managers.

01.4. Describe your organisation’s investment principles and overall investment strategy, interpretation of fiduciary (or equivalent) duties,and how they consider ESG factors and real economy impact.

CalPERS’ Investment and Pension Beliefs (Beliefs) articulate CalPERS’ perspective about public pension administration and portfolio management. The Beliefs guide CalPERS Executives and staff in decision-making, planning, and communicating with stakeholders and establish parameters for policy advancement. The Beliefs reflect CalPERS’ values and acknowledge CalPERS’ responsibility to sustain its ability to pay benefits for generations.  Specifically, Investment Beliefs:

  • Provide a basis for strategic management of the investment portfolio
  • Inform organizational priorities
  • Ensure alignment between the Committee and staff
  • Guide development of CalPERS culture

https://www.calpers.ca.gov/page/about/organization/calpers-story/our-mission-vision#investment-beliefs

In alignment with the Beliefs, the 2017-2022 CalPERS Strategic Plan defines the long-term direction of the organization and is expressed through five strategic goals and objectives focused on pension fund sustainability, healthcare affordability, risk management, talent management and reduced complexity.  Specifically, the goal of Fund Sustainability includes objectives of delivering target risk-adjusted investment returns and the integration of ESG considerations into investment processes and decisions.

https://www.calpers.ca.gov/docs/forms-publications/2017-22-strategic-plan.pdf

Consistent with California Constitution, Article XVI, section 17, all CalPERS investment activities, and all investment transactions, shall be designed and executed solely in the interest of, and for the exclusive purposes of, providing benefits to participants and their beneficiaries, minimizing employer contributions thereto, and defraying reasonable expenses of administering the system.

 

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]

CalPERS’ Mission

Deliver retirement and health care benefits to members and their beneficiaries.

https://www.calpers.ca.gov/page/about/organization/calpers-story/our-mission-vision

CalPERS' Investment Office Mission

Manage the CalPERS investment portfolio in a cost effective, transparent, and risk-aware manner in order to generate returns to pay benefits.

CalPERS' Total Fund Investment Policy

The overall objective of the CalPERS investment program is to generate returns at an appropriate level of risk to provide members and beneficiaries with benefits as required by law. This will be accomplished through a carefully planned and executed long-term investment program that efficiently and effectively allocates and manages the assets of CalPERS.

The CalPERS' Total Fund Investment Policy (Policy) is designed to allow CalPERS to achieve a long-term total return. Accordingly, prudent risk-taking is appropriate within the context of overall diversification to meet CalPERS’ long-term investment objectives.  As adopted by the CalPERS Board of Administration's Investment Committee (Committee), the Policy sets out CalPERS' Investment Beliefs and overarching investment purposes and objectives with respect to all investment programs. The purpose of the Policy is to provide a framework for the management of CalPERS' assets. The Policy outlines objectives, benchmarks, restrictions and responsibilities so the Committee, staff, consultants, managers, members, and beneficiaries, and all other CalPERS stakeholders, clearly understand the objectives and policies of the CalPERS investment program.  

The Policy is reviewed and approved annually by the Committee to ensure policy relevancy remains due to the changing nature of CalPERS assets and investment programs, benefit and structural changes, and economic conditions.  The Policy was last reviewed and approved in November 2018.  Policies can be found here: https://www.calpers.ca.gov/page/investments/about-investment-office/policies  

CalPERS' Governance and Sustainability Strategy

Included in the Policy is the CalPERS’ Governance and Sustainability Strategy, implemented through the three channels of Integration, Engagement and Advocacy, supported where applicable by the use of strategic partnerships to advance CalPERS’ investment and policy objectives.  Additionally, Investment Office Staff are required annually to report on investment program strategy and its alignment with the CalPERS Governance and Sustainability Strategy and associated in-force strategic plan.

CalPERS' Governance and Sustainability Principles 

In March 2015, the CalPERS' Governance and Sustainability Principles (Principles) were incorporated in to the Policy to further integrate environmental and social factors alongside CalPERS’ governance agenda.   The Principles set forth the CalPERS’ views on best practices guiding our engagement with companies, advocacy agenda with policy makers, and expectations for both our internal and external managers across the total fund.

CalPERS' Total Fund Governance and Sustainability Strategic Plan

In August 2016, the Committee approved CalPERS' Total Fund Governance and Sustainability Strategic Plan (Plan).  The 5-Year Plan identified six strategic priorities and core workload initiatives focused on ESG issues which cross the Total Fund and effect CalPERS ability to manage risk and return. Each strategic initiative has a clearly defined objective, key performance indicators to serve as measures of success, milestones and a timeline. 

As outlined in the Policy, the Sustainable Investments Program is responsible for the oversight and management of the Plan and progress is reported annually to the Committee. https://www.calpers.ca.gov/docs/board-agendas/201903/invest/item09a-01_a.pdf

Plan initiatives outline CalPERS’ future work in sustainable investment and include:

  • Data and Corporate Reporting Standards
  • Climate Action 100+ (formerly termed UN PRI Montreal Pledge company engagement)
  • Diversity and Inclusion
  • Manager Expectations
  • Sustainable Investment Research
  • Private Equity Fees and Profit Sharing Transparency

Progress and completion of these strategic priorities are expected to result in benefits including:

  • Strengthened understanding and ability to manage ESG driven risk and opportunities through improved data and disclosures and integration
  • Reduced climate change risk
  • Enhanced diversity of board composition, which should lead to more effective and dynamic boards to better mitigate risk and enhance long-term performance for shareowners.

 

 

 

 

01.6. Additional information [Optional].

          
        
I confirm I have read and understood the Accountability tab for SG 01 I confirm I have read and understood the Accountability tab for SG 01

SG 01 CC. Climate risk (Private)


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

URL/Attachment

URL/Attachment

URL/Attachment

URL/Attachment

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

Other description (1) Responsible Contractor Program (RCP): CalPERS has a deep interest in the condition of workers employed by CalPERS and its Managers and Delegates. Through the RCP Policy, CalPERS supports and encourages fair wages/ benefits for workers employed by its contractors/ subcontractors, subject to fiduciary principles concerning duties of loyalty and prudence
Other description (2) ESG Integration: CalPERS' Board Approved the Total Fund Governance and Sustainability Strategic Plan, which includes objectives and KPIs designed to integrate ESG risk and opportunity considerations into investment processes and decisions.

02.3. Additional information [Optional].

CalPERS' Total Fund Investment Policy (Policy)

The CalPERS' Total Fund Investment Policy (Policy) is designed to enablew CalPERS to achieve a long-term total return. Accordingly, prudent risk-taking is appropriate within the context of overall diversification to meet CalPERS’ long-term investment objectives.  As adopted by the CalPERS Board of Administration's Investment Committee (Committee), the Policy sets out CalPERS' Investment Beliefs and overarching investment purposes and objectives with respect to all investment programs. The purpose of the Policy is to provide a framework for the management of CalPERS' assets. The Policy outlines objectives, benchmarks, restrictions and responsibilities so the Committee, staff, consultants, managers, members, and beneficiaries, and all other CalPERS stakeholders, clearly understand the objectives and policies of the CalPERS investment program.  

The Policy is reviewed and approved annually by the Committee to ensure policy relevancy remains due to the changing nature of CalPERS assets and investment programs, benefit and structural changes, and economic conditions.  The Policy was last reviewed and approved in November 2018.  Policies can be found here: https://www.calpers.ca.gov/page/investments/about-investment-office/policies

Each asset class has their own Investment Policy: 

Global Equity: https://www.calpers.ca.gov/docs/policy-global-equity.pdf
Fixed Income: https://www.calpers.ca.gov/docs/policy-global-fixed-income.pdf
Private Equity: https://www.calpers.ca.gov/docs/policy-private-equity-program.pdf ; https://www.calpers.ca.gov/docs/policy-restrict-private-equity-outsourcers.pdf
Real Assets (Real Estate, Infrastructure, & Forestland): https://www.calpers.ca.gov/docs/policy-real-assets-program.pdf ; https://www.calpers.ca.gov/docs/policy-responsible-contractor-2015.pdf
Other Programs: https://www.calpers.ca.gov/docs/policy-absolute-return-strategies.pdf ; https://www.calpers.ca.gov/docs/policy-inflation-assets.pdf

CalPERS' Investment Beliefs

The Beliefs reflect CalPERS’ values and acknowledge CalPERS’ responsibility to sustain its ability to pay benefits for generations.  Specifically, Investment Beliefs are: 

  • Liabilities must influence the asset structure
  • A long time investment horizon is a responsibility and an advantage
  • CalPERS investment decision may reflect wider stakeholder views, provided they are consistent with its fiduciary duty to members and beneficiaries
  • Long-term value creation requires effective management of three forms of capital: financial, physical, and human
  • CalPERS must articulate its investment goals and performance measures and ensure clear accountability for their execution
  • Strategic asset allocation is the dominant determinant of portfolio risk and return
  • CalPERS will take risk only where we have strong belief we will be rewarded for it
  • Cost matter and need to be effectively managed
  • Risk to CalPERS multi-faceted and not fully captured through measurers such as volatility or tracking error
  • Strong processes and teamwork and deep resources are needed to achieve CalPERS goals and objectives.

https://www.calpers.ca.gov/page/about/organization/calpers-story/our-mission-vision#investment-beliefs 

CalPERS' Governance and Sustainability Principles:

Included in the Total Fund Policy, CalPERS Principles serve as the framework by which CalPERS executes its shareowner proxy voting responsibilities; engages public companies to achieve long-term, sustainable risk-adjusted returns and works with internal and external investment managers to ensure their practices align with CalPERS' Investment Beliefs. The Investment Committee reviews the Principles on an annual basis to ensure relevancy.   Most recent revisions to the Principles included:

  • New principle on Corporate Culture
  • Expanded Environmental Practices 

The updated Principles and CalPERS Total Fund Policy were reviewed and approved by the Investment Committee in June 2018. 

CalPERS' Governance and Sustainability Strategy

Included in the Policy is the CalPERS’ Governance and Sustainability Strategy, implemented through the three channels of Integration, Engagement and Advocacy, supported where applicable by the use of strategic partnerships to advance CalPERS’ investment and policy objectives.  Additionally, Investment Office Staff are required annually to report on investment program strategy and its alignment with the CalPERS Governance and Sustainability Strategy and associated in-force strategic plan.

CalPERS' Total Fund Governance and Sustainability Strategic Plan

In August 2016, the Committee approved CalPERS' Total Fund Governance and Sustainability Strategic Plan (Plan).  The 5-Year Plan identified six strategic priorities and core workload initiatives focused on ESG issues which cross the Total Fund and effect CalPERS ability to manage risk and return. Each strategic initiative has a clearly defined objective, key performance indicators to serve as measures of success, milestones and a timeline. 

As outlined in the Policy, the Sustainable Investments Program is responsible for the oversight and management of the Plan and progress is reported annually to the Committee. https://www.calpers.ca.gov/docs/board-agendas/201903/invest/item09a-01_a.pdf

Plan initiatives outline CalPERS’ future work in sustainable investment and include:

Data and Corporate Reporting Standards
Climate Action 100+ (formerly termed UN PRI Montreal Pledge company engagement)
Diversity and Inclusion
Manager Expectations
Sustainable Investment Research
Private Equity Fees and Profit Sharing Transparency

New Managing Investment Director

CalPERS created a new position, Managing Investment Director of Sustainabe Investments, which reports to the Chief Investment Officer.  This is the first time CalPERS has had a position at this level in the Investment Office which is focused on Sustainable Investments. https://www.calpers.ca.gov/page/newsroom/calpers-news/2018/beth-richtman-named-managing-investment-director-sustainable-investments

Other news articles:

https://www.calpers.ca.gov/page/newsroom/calpers-news/2018/2018-corporate-engagement-strategy

 


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.

CalPERS has taken steps to achieve transparency and implement policies and reforms that strengthen the pension fund’s accountability.  The actions are aimed at providing CalPERS members, employers, and the public complete confidence in the System’s decision-making process while ensuring the CalPERS Board is meeting its fiduciary duty.  Further information on these actions may be found here:  https://www.calpers.ca.gov/docs/forms-publications/accountability-transparency-ethics.pdf

CalPERS has adopted several policies and regulations relating to the management of actual or potential conflicts of interest in the investment process.  These include, but are not limited to:

  • Statement of Incompatible Activities Regulation
  • External Investment Resource Conflict of Interest Regulation
  • Required Contract-Related Disclosures Regulation
  • Placement Agent Disclosure Regulation
  • Personal Trading Regulation
  • Insider Trading Policy
  • Investment Office Travel Policy

03.3. Additional information. [Optional]

UPDATE FROM ICOR IN PROGRESS 03.12.19

We have these additional policies that are designed to promote transparency and prevent external influences from unduly influencing CalPERS staff:

CalPERS Gift Policy
Undue Influence Policy
Travel Transparency Policy
Insider Trading Policy 
Personal Trading Policy (online platform to confirm personal trades applicable to the policy) 
Outside Employment Information
Conflict of Interest Code (Form 700)
Healthcare Investment Initiative Inter-Program Conflict of Interest Protocol

This policy is related to the conflicts of interest between the CalPERS pension and health plans and establishes the following protocol:

Monitor and identify Inter-Program Conflicts.
Each Official is responsible for identifying and reporting Actual, Potential, and Perceived Inter-Program Conflicts of Interest to the Conflicts Officer.
Each Official shall take steps to ensure such reporting, including without limitation, attending training by the Conflicts Officer contemplated by Section V.A.
Private Equity will be responsible for assisting CalPERS Health Benefits Branch to identify Healthcare Investment Initiative investments.
Once a Disclosable Interest has been reported to the Conflicts Officer, the Conflicts Officer may direct the Official to suspend further actions.
http://www.calpers.ca.gov/eip-docs/investments/policies/ethics/hlth-invest-init-inter-prog-con.pdf

Statement of Economic Interest

All Senior and trading staff must also complete a statement of economic interest known as Form 700. Filers must disclose certain investments, income, gifts and travel payments. The Form is available for inspection bay any member of the public including the media. CalPERS also publishes all Form 700s from Investment Manager level and above on our website.

Insider Trading Policy

CalPERS also has a Restricted Company List as per CalPERS' Insider Trading Policy. The personal trading regulation requires Covered Persons and their spouses to disclose personal investment holdings and utilize personal trading pre-clearance system. The Personal Trading Regulation provides safeguards against violating fiduciary responsibility to CalPERS and its members. On an annual basis staff must report any personal investment holdings.

http://www.calpers.ca.gov/eip-docs/investments/policies/ethics/insider-trading.pdf


SG 04. Identifying incidents occurring within portfolios (Private)


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