CalSTRS Advances Diversity and Inclusion Principles to Promote Lasting, Impactful Change
WEST SACRAMENTO, CA – August 9, 2018 – As the world’s largest educator-only pension fund, the California State Teachers’ Retirement System (CalSTRS) embodies a century-long pledge to invest hard-earned pension contributions on behalf of almost one million California educators, retirees and their beneficiaries.
CalSTRS is committed to setting best practice precedents, implementing innovative diversity and inclusion principles, motivating positive change, and advancing the world’s investment markets. We do this by establishing collaborative relationships across a vast network of investment managers, portfolio companies and industry associations in order to maximize returns and leverage opportunities for positive change.
Over the years, CalSTRS’ success as an institutional investor can be attributed to several factors, including a focus on diversification within the portfolio and the investment manager community; diversity of thought, ethnicity, age and other demographics organization-wide; and the unique asset allocation strategies that are regularly implemented by the Teachers’ Retirement Board.
And when it comes to diversity and inclusion within the investments industry, CalSTRS proactively leverages opportunities to collaboratively engage with companies in the portfolio as well as leaders on a global scale in order to motivate positive momentum. To recap the organization’s efforts, CalSTRS issues the annual report with details regarding efforts to improve diversity, including internal staff development, portfolio company engagement, outreach and education, and the emerging manager programs. Below are some of the highlights from the 2018 report:
- Emerging manager programs (pages 6-53) – As of December 31, 2017, CalSTRS has close to $12 billion invested in emerging managers. This figure represents roughly 10 percent of our externally managed assets. An ethnically-diverse group of people own approximately half of these firms (based on self-disclosure). Consistent with California law, CalSTRS does not grant preferential treatment on the basis of race, gender, color, ethnicity or national origin in its contracts with external investment managers and refrains from establishing requirements for the demographic composition of any particular investment manager’s organization. Therefore, in adherence to California law, CalSTRS defines firms by their size – either small and emerging or large and established firms.
- CalSTRS staff diversity (pages 10-15) – Nearly half of CalSTRS non-administrative investments staff, or 47 percent, identify as ethnically diverse, which is important considering around 50 percent of assets are managed internally. In addition, the Investments Branch developed a program to bring young adults from diverse backgrounds to CalSTRS and engage them in an interactive, job-shadowing experience in order to potentially open new career pathways.
- Portfolio company engagement (pages 28-31) – In 2016, the Investment Committee approved the Corporate Governance Enhanced Diversity Initiative. The goal is for CalSTRS staff to have in-depth discussions with companies to understand their diversity programs and overall impact in developing diverse representation within senior executive staff, as well as strengthening the pipeline of diverse candidates to serve on their boards.
- Outreach and education on diversity and inclusion in the investments industry (pages 32-38) –
- CalSTRS’ senior investment staff regularly engage in productive dialog at various conferences within the diversity investment manager community to generate awareness of how different fund managers can potentially do business with CalSTRS.
- CalSTRS and CalPERS hosted more than 350 participants at the 2017 Diversity Forum to discuss how to better capitalize on the abilities of the diverse modern workforce. The forum focused on research, solutions and insights mainly in the investment and technology sectors. CalSTRS’ external investment managers were extended invitations to participate in this event in order to encourage an open and fruitful conversation. The next Diversity Forum is being planned for summer 2019 to continue ongoing dialog and outreach efforts.
- On an annual basis, CalSTRS hosts emerging manager receptions for interested fund managers to meet with Investments staff to learn more about the due diligence process required within each asset class. At the October 2017 reception, a diverse group of more than 100 emerging managers attended, and similar attendance is expected at the November 7, 2018, event at CalSTRS headquarters in West Sacramento, California.
- Survey of investment manager diversity efforts (pages 40-47) – CalSTRS’ endeavors to promote diversity include the goal of “widening the funnel” of diverse, experienced investment professionals. In 2017, CalSTRS began sending an annual survey to larger external investment managers asking about their internal efforts to improve diversity among their investment teams.
At CalSTRS, the advancement of diversity and inclusion principles is essential to fulfilling the organization’s mission of securing the financial future and sustaining the trust of California’s educators. And as one of the world’s largest institutional investors, CalSTRS will continue to assess how existing programs and strategies can be refreshed and renewed on an ongoing basis in order to motivate lasting, positive change.
Consistent with this mission-driven goal, CalSTRS conducts proactive outreach and productive dialog with various stakeholders, investment partners, portfolio companies and influential industry leaders about the importance of moving the needle to enhance, refresh and promote diversity of thought, business practices and collaborative efforts. Moving forward, CalSTRS will continue implementing innovative, diverse and impactful investment strategies in pursuit of creating long-term value for all involved.