Tragedy Serves as a Reminder of Responsibility

Blog entry Jack Ehnes

To the families affected by the horrific and disturbing events that took place December 14, 2012, at Sandy Hook Elementary School, we offer our deepest sympathy. Our thoughts and prayers are with you through this very difficult and troubling time. We understand there is nothing we can say or offer to make up for the tremendous losses you suffered.

Good environmental, social and governance, or ESG, principles bring to bear a question of responsibility in the companies with which we invest. The tragic events at Sandy Hook Elementary bring to light our involvement with a company that, in part, appears out of place with our policy. This is a fair question. When faced with a similar issue several years earlier, CalSTRS divested in tobacco products.

CalSTRS invested in Cerberus Capital Series 3 in 2003, and again in 2007 to Cerberus Capital Series 4 as part of the core Private Equity program. The Freedom Group represents a very small investment within these funds. CalSTRS investment holdings total about 2 percent of Freedom Group.

In 2008, after investment in Cerberus, CalSTRS adopted a series of 21 Risk Factors to assess developing investment risks in geopolitical and social issues. The policy requires that risks associated with products posing a significant threat to human well-being be taken into account before an investment is made. CalSTRS intends to apply the criteria to all previously existing investment decisions to determine if their products contradict our risk factors. Our first step is always to research and engage those companies directly.

Among the ESG considerations CalSTRS holds itself accountable are: respect for human rights, civil liberties, political rights and human health. Probably the most important in this situation is human health. As a result, the Teachers’ Retirement Board Investment Committee commits to examine this issue on Wednesday, January 9, 2013. Already, Cerberus Capital Management has announced its intent to sell their investment holdings in the Freedom Group.

CalSTRS mission seeks to secure the financial future and sustain the trust of California’s educators. This carries with it a responsibility to engage corporate management on the ramifications of its investment decisions, an issue CalSTRS takes seriously.

As a global organization that represents educators, we express our honor and respect for the bravery demonstrated by the staff at Sandy Hook Elementary School. You have set an example for the nation and world to follow.


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