How a State is Rolling ESG into its Pensions

How is California integrating ESG into its investments and policies? A partnership between the U.N.-supported Principles for Responsible Investment & UC Berkeley Law’s Center for Law, Energy & the Environment.

There’s 40 recommendations, and here are the high priority items:

• The State of California, led by the Governor or State Treasurer or State Controller, should convene a Task Force on Responsible Investment.
• All institutional investors should integrate material ESG factors into investment processes and decision-making to the fullest extent possible.
• Public pension funds should develop governance structures that encourage better long- term and data-driven ESG investment decision-making.
• Public pension funds should require that investment consultants and investment managers consider ESG factors in providing investment advice or investment management.
• The state legislature should enact legislation directing financial advisors (including investment advisors, broker-dealers, and others) that are licensed and regulated by the Department of Business Oversight to ask retail investors if they have a preference for investments that consider ESG factors and to offer them ESG-aligned investment opportunities.
• The state legislature should mandate climate risk disclosure or Task Force on Climate- Related Financial Disclosures reporting for all publicly traded companies incorporated or headquartered in California.
• The state legislature should direct mandatory climate risk stress testing for financial institutions (state-chartered banks, credit unions, mortgage lenders, and others) under the jurisdiction of the Department of Business Oversight.
• The State Treasurer, Controller, and Director of Finance should leverage their positions on the boards of state financing authorities to add ESG-related disclosure requirements for state financing.
• The Department of Insurance should undertake climate risk stress testing of insurer underwriting and investment portfolios, annually conduct climate risk scenario analysis of insurers’ investment portfolios, and require insurers to identify, analyze and address climate risks to their underwriting and investment portfolios.
• California insurers should integrate ESG considerations into their operations and investment decision-making.

Pensions & Investments | Road map for California ESG integration unveiled

Principles for Responsible Investing | The California Responsible Investment Roadmap