CalPERS CEO Marcie Frost decried the politicization of environmental, governance and social investing at Wednesday’s board meeting and highlighted the benefits of the $443.2 billion pension plan’s ESG approach.
“In some cases, the (midterm election) campaign rhetoric not only dismissed the danger of climate change, it went so far as to mischaracterize a strategy we believe in strongly: examining the risk factors of the environment, of social inequality, and of good governance,” Ms. Frost said. “The falsehoods about ESG risk analysis have been so widespread that I even heard them repeated during our Educational Forum”(in Anaheim, Calif., Nov. 1-3.
The result of the Sacramento-based California Public Employees’ Retirement System’s strategy is that it has reduced the carbon intensity of its global equity portfolio by more than 30% and its global fixed-income portfolio by more than 50% over the past seven years, she said, citing a climate report shared with the investment committee Monday.
CalPERS’ ESG approach has also produced investment opportunities, including about $19 billion in global equity and around $1 billion of its corporate credit portfolio, she said. And roughly 51% of its infrastructure portfolio is invested in renewable energy, energy-efficient infrastructure, sustainability-certified and carbon-neutral assets, Ms. Frost said.
“But let’s be clear: Applying the lens of ESG is not a mandate for how to invest. Nor is it an endorsement of a political position or ideology,” she said. “Those who say otherwise are actually advocating for investors like CalPERS to put on blinders … to ignore information and data that might otherwise help build on the retirement security of our 2 million members.”