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Los Angeles County Employees Retirement Association (LACERA)

PRI reporting framework 2020

You are in Organisational Overview » Asset class implementation gateway indicators

Asset class implementation gateway indicators

OO 10. Active ownership practices for listed assets

10.1. Select the active ownership activities your organisation implemented in the reporting year.

Listed equity – engagement

Listed equity – voting

Fixed income SSA – engagement

Fixed income Corporate (financial) – engagement

Fixed income Corporate (non-financial) – engagement

Fixed income Corporate (securitised) – engagement


OO 11. ESG incorporation practices for all assets

Select the externally managed assets classes in which you and/or your investment consultants address ESG incorporation in your external manager selection, appointment and/or monitoring processes.
Asset class
ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes
Listed equity

Listed equity - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Fixed income - SSA

Fixed income - SSA - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Fixed income - corporate (financial)

Fixed income - corporate (financial) - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Fixed income - corporate (non-financial)

Fixed income - corporate (non-financial) - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Fixed income - securitised

Fixed income - securitised - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Private equity

Private equity - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Property

Property - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Infrastructure

Infrastructure - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Commodities

Commodities - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Hedge funds

Hedge funds - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Fund of hedge funds

Fund of hedge funds - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Cash

Cash - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

Other (1)

Other (1) - ESG incorporation addressed in your external manager selection, appointment and/or monitoring processes

11.3b. If your organisation does not integrate ESG factors into investment decisions on your externally managed assets, explain why not.

LACERA has moved to direct investments in hedge funds from former fund of funds strategy.  ESG was not considered in the former strategy. Cash overlay strategy (represented as Other above) utilizes derivatives to neutralize asset class over-/under-weights to asset class targets and as a result, ESG factors are not relevant to the strategy.

11.4. Provide a brief description of how your organisation includes responsible investment considerations in your investment manager selection, appointment and monitoring processes.

The Los Angeles County Employees Retirement Association (LACERA) seeks to responsibly steward its investments in a manner that promotes and safeguards the economic interests of LACERA and its members, consistent with LACERA's mission to "produce, protect, and provide the promised benefits." LACERA’s Investment Policy Statement (IPS) guides oversight and management of the total fund, including consideration of environmental, social, and governance (ESG) factors that may impact the risk profile or the value of LACERA's investments. The IPS is framed upfront by Investment Beliefs which formally recognize ESG factors as relevant to LACERA’s investment process. It incorporates fundamental tenets of responsible stewardship into the fund’s investment philosophy and strategy, including management of beneficial ownership rights (such as proxy voting and active ownership strategies) that aim to promote sustainable, long-term value.

LACERA's Corporate Governance Principles identify LACERA's core principles of corporate governance, inclusive of environmental and social factors. They are intended to advance LACERA's Investment Beliefs and broader Investment Policy Statement by articulating LACERA's view on sound governance and guiding LACERA's proxy voting and stewardship initiatives. All of LACERA’s investment activities are rooted in its fiduciary obligations, which – as addressed in the fund’s Investment Policy Statement and Corporate Governance Policy – compel and guide its corporate governance and related activities.

LACERA has incorporated into its due diligence and evaluations of external managers (such as requests for proposals and other search processes) standardized questions to assess the extent to which firms identify, integrate, and report on material ESG factors as part of their investment process for the specified investment mandate. Enhanced due diligence questions probe external managers’ commitment to ESG, identify how managers resource and provide capacity to execute their ESG integration, and assess the methods by which a manager identifies ESG factors that may be relevant to the specific investment strategy and incorporate ESG information into risk/return analysis and portfolio construction.

To facilitate clear information on ESG integration efforts, LACERA has incorporated into investment management agreements and limited partner agreements language by which LACERA expects to receive periodic reporting of external managers’ ESG integration practices.

LACERA has developed a multivariate “manager scorecard” by which LACERA measures and monitors external asset managers’ quality and performance. The scorecard tracks five core pillars for each of LACERA’s external managers:

(1) Performance of Individual Investment Mandate

(2) Operational Strength (including investment process, risk management and internal controls, and talent management)

(3) ESG Integration (assessing the extent to which material ESG factors are identified, assessed, and incorporated into risk/return analysis and portfolio construction and intended to reflect the continuum of emerging and evolving ESG best practices)

(4) Relationship Quality (including value added services and and proportionality of LACERA’s mandate to the firm’s assets under management)

(5) Fees (relative to benchmark of median fees by asset category and/or investment structure)

The manager scorecard augments LACERA’s efforts to actively assess and monitor multidimensional aspects of its investment manager relationships. It is intended to be a uniform process across asset classes. By assessing all managers by similar measures, it is also intended to highlight nuances and facilitate focused discussion and evaluation of manager roles within the total fund’s strategy and portfolio.

To the extent feasible, all manager agreements incorporate provisions by which LACERA may receive periodic reporting of managers’ ESG and responsible investing practices and processes in order to enhance LACERA’s capacity to regularly and prudently monitor managers’ ESG and responsible investment practices.


OO 12. Modules and sections required to complete

12.1. Below are all applicable modules or sections you may report on. Those which are mandatory to report (asset classes representing 10% or more of your AUM) are already ticked and read-only. Those which are voluntary to report on can be opted into by ticking the box.

Core modules

RI implementation directly or via service providers

Direct - Listed Equity active ownership

RI implementation via external managers

Indirect - Selection, Appointment and Monitoring of External Managers

Closing module

12.2. Additional information. [Optional]


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