Investors Controlling $1 Trillion in Assets Call on Russell 1000 Companies to Integrate Sustainability Into Business Models
CalSTRS Says Environmental, Social, Governance Concerns Are Clear Material Business Risks
BOSTON – Citing global climate change, resource constraints and growing population pressures, more than two dozen major institutional investors, collectively managing $1 trillion in assets, have asked the Russell 1000 companies in a jointly-signed letter to actively embrace the “new reality” of so-called ESG risks – environmental, social and governance – in both their actions and required investor disclosures.
“Environmental and social sustainability issues can no longer be considered off-balance sheet issues,” wrote the investors. “Rather they are material, financial issues posing both risks and opportunities to the long-term success of corporations.”
Major investors signing the letter include the nation’s two largest public pension funds, the California Public Employees Retirement System (CalPERS) and California State Teachers’ Retirement System (CalSTRS), as well as Calvert Asset Management, Walden Asset Management, Pax World Management Corp. and Generation Investment Management.
The letter comes on the heels of CalPERS and CalSTRS making formal public commitments last month to better integrate ESG factors across all their investment decision-making.
The letter was also signed by state treasurers and comptrollers from New York, Illinois, California and Connecticut, plus the AFL-CIO and Laborers’ International Union of North America (LIUNA), and several church-based investment funds.
Ceres President Mindy Lubber, whose investor/business/public interest coalition organized the signatories, said mainstream investors like these can no longer stand still while companies their clients depend on fail to see these wide-ranging risks.
“We’ve seen enough hidden financial risks with globally-damaging economic results in recent years,” Lubber said. “The collapse of financial markets, the BP oil spill, the Massey coal mine disaster and other mishaps make clear it’s time that companies operate with a clear view of all their risks and costs – but also the tremendous opportunities open to those businesses across all sectors who compete by developing solutions to environmental and social issues.”
The letter urges companies to use a Ceres-developed tool to catalyze comprehensive strategies and actions to imbed sustainability across all aspects of their business. That tool, the 21st Century Corporation: Ceres Roadmap for Sustainability, provides a platform for accelerating best practices in governance, stakeholder engagement, disclosure and performance across a company’s entire operations and supply chains.
“We encourage you not only to design and implement a robust sustainability strategy,” said the investors’ letter, “but also to demonstrate to shareowners and other stakeholders how effectively you are managing sustainability risks and opportunities.”
The letter also asks companies to “use your standard investor communication vehicles—analyst calls, road shows, annual meetings—to highlight actions you are taking to address material sustainability risks and transform them into competitive opportunities.”
Several of the letter signers – CalPERS, CalSTRS and the AFL-CIO – announced a series of specific, coordinated commitments last month to combat climate change and other societal sustainability challenges as part of a larger group, the Investor-Business Roundtable for a Sustainable Economy.
The Roundtable grew from a process launched by Ceres where business, investor and labor leaders came together to discuss what they could do collectively to address these urgent global challenges.
As part of that process, CalPERS agreed to fully integrate ESG factors in all its investment decision-making and to use the Ceres Roadmap for its company engagement work. CalSTRS agreed to accelerate a program for outside fund managers investing on its behalf to integrate sustainability and ESG factors into their decision-making. And the AFL-CIO committed to work with the Clinton Global Initiative, Taft-Hartley, public pension funds and private investors to create new financing mechanisms to boost investment and job creation in commercial building retrofits for energy efficiency and clean energy.
Ceres leads a national coalition of investors, environmental groups and other public interest organizations working with companies to address sustainability challenges such as global climate change and water scarcity. www.ceres.org