UC Davis and CalPERS Partner to Study Impact of Sustainability Factors on Investments

By Karen Nikos and Tim Akin

The Graduate School of Management is partnering with the California Public Employees’ Retirement System (CalPERS), the largest public pension fund in the U.S., on the Sustainable Investment Research Initiative (SIRI). The goal: to drive innovative thought leadership that will inform and advance CalPERS’ understanding of sustainability factors and the impact they have on financial performance.

The initiative launched in January with a global call for working papers from scholars and investment practitioners in the fields of finance, economics, accounting, law and business. The papers will contribute to a debate and discussion on the impact of environmental, social and governance (ESG) issues on long-term value creation and capital market stability.

The Graduate School of Management will collect and review the papers. Authors of the most distinguished papers will be invited to present their research at the inaugural Sustainability & Finance Symposium, to be hosted by UC Davis on June 7. Columbia Law School’s Millstein Center for Global Markets and Corporate Ownership will assist with the call for papers.

Finance Professor Brad Barber, director of the UC Davis Center for Investor Welfare and Corporate Responsibility, will co-chair the peer review of the papers for the symposium.

“We look forward to working with CalPERS on this path-breaking research to provide an independent analysis to better understand the potential impact of ESG issues on capital markets, companies and intermediaries in the investment chain,” said Dean Steven C. Currall. “This project is both theoretical and practical.”

Headquartered in Sacramento, Calif., CalPERS’ assets total about $251 billion. It administers retirement benefits for more than 1.6 million California state, local government and public school employees, retirees, and their families on behalf of more than 3,000 public employers, and health benefits for more than 1.3 million enrollees.

“CalPERS has made it a priority to use sustainability factors in making investment decisions across our fund,” said Anne Simpson, CalPERS senior portfolio manager and director of global governance. “This initiative will aid us in our application, and help us draw conclusions that can inform our investment strategy and beliefs.”

In current scholarship and in the investment world, there is a lack of global consensus on how ESG factors influence investment risk and return across asset classes. ESG issues cover many topics, ranging from climate change, labor practices and human rights, to executive compensation.

In 2011, the CalPERS board approved integrating ESG issues as a strategic priority across its investment portfolio. It is grounded in the three forms of economic capital—financial, human and physical—that are needed for long-term value creation, according to the pension fund’s 2012 report, “Towards Sustainable Investment.” SIRI will provide independent evaluation and insight for CalPERS sustainability strategy, as well as contribute to the larger debate.