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February 06, 2004
California Treasurer Proposes Environmental Screening for State Pension Investments
by William Baue
California Treasurer Phil Angelides pitches the Green Wave Initiative to CalPERS and CalSTRS, the
state's huge pension funds, asking them to support green investments.
SocialFunds.com --
Earlier this week, California State
Treasurer Phil Angelides proposed the Green Wave Initiative, a four-pronged program for the
state's public pension plans to support environmentally responsible investing. The proposal calls
for the California Public Employees' Retirement System (CalPERS) and the California State Teachers' Retirement System
(CalSTRS) to funnel $1.5 billion into
environmentally-sound investments.
Treasurer Angelides, who sits on the boards of both
CalPERS and CalSTRS, cited extensive research showing how such investments could enhance long-term
shareowner value. As the nation's largest and third -largest pension funds with $164 billion and
$113 billion portfolios respectively, CalPERS and CalSTRS often set precedents that other
institutional investors follow.
"Green Wave could have enormous implications for
institutional investors," said Joan Bavaria, who spoke at the press conference. Ms. Bavaria is
president of Trillium Asset Management
and founding chair of the Coalition for Environmentally Responsible Economies (CERES). "Treasurer Angelides has challenged CalPERS and CalSTRS to
take positive action to support a sustainable future--it will be hard for them to refuse these four
initiatives, which were conceived carefully to avoid any kind of reckless disregard for financial
fiduciary duties."
The first of the four prongs calls on the CalPERS and CalSTRS to demand
environmental accountability and reporting through a new environmental governance program.
The second prong asks them to allocate a combined $500 million to private equity investments,
venture capital, and project financing in environmental technologies.
The third prong
urges the pension plans to apply environmental screening of companies to funds with a combined $1
billion in assets.
And the fourth prong calls for auditing the plans' real estate
portfolios, which now hold a combined $16 billion in real estate in California and in 22 countries
around the world, to maximize clean energy, energy efficiency, and green building standards.
"No decision has been made by CalPERS regarding this initiative," said Brad Pacheco, a CalPERS
spokesperson. "The treasurer is one of 13 members that sit on our Investment Committee and it will
take a decision by the full Committee to proceed with this initiative."
"Our investment
staff has begun to analyze these types of investments and is expected to report back to our
Investment Committee at their March meetings with their findings," Mr. Pacheco told
SocialFunds.com.
Similarly, CalSTRS spokesperson Kirsten Macintyre told SocialFunds.com
that the CalSTRS board has discussed the initiative but has not voted on implementing it, which it
would only do after careful consideration.
The treasurer makes a strong case for
implementation, documenting extensive research supporting his plans. For example, he cites a 2002
report by Seattle-based Light Green Advisors, entitled The
Profitable Correlation Between Environmental and Financial Research, that surveys the findings
of 20 empirical studies on this correlation covering the last decade.
"Among the findings,
it is reported that companies that go beyond legal compliance with environmental regulations
realize stronger stock price gains and market value growth than the S&P [500]," states a fact sheet from
the treasurer's office. "In contrast, laggard companies that are threatened by actual or impending
laws tended to experience weaker returns."
This body of research supports the
treasurer's contention that his fiduciary duty to enhance value requires him to address these
environmental risks and opportunities. This view starkly contrasts the conventional wisdom that
fiduciary responsibility prevents institutional investors from taking environmental issues into
consideration.
"The treasurer is an articulate and powerful proponent of a new
interpretation of the term 'fiduciary' to include a responsibility for the environmental and social
outcomes of the investing process and investing decisions," said Ms. Bavaria.
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SRI World Group, Inc. All Rights Reserved.
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