CalPERS next month will begin a one-year pilot program of its sustainable investment guidelines, the latest phase in its multiyear project to integrate ESG manager expectations across all asset classes.

In investment committee meeting materials, the draft of the sustainable investment guidelines integrates four of the Sacramento-based $308.1 billion California Public Employees’ Retirement System’s 10 investment beliefs it established in September 2013, along with three United Nations Principles for Responsible Investment, and CalPERS’ global governance principles.

CalPERS states in its global governance principles that “environmental, social and corporate governance issues can affect the performance of investment portfolios.”

The core common elements of external manager selection involve all asset classes requesting and reviewing potential managers’ ESG/sustainable investment policies, asking ESG questions specific to individual asset classes, and factoring those policies and responses into the selection process.

Each asset class would also include a contracting section including ESG/sustainable investing requirement wording, and have a regular monitoring process.

The pilot program of the draft guidelines for all asset classes will begin in June and findings will be reported to the investment committee in May 2016.

Source: Pensions & Investments