CalSTRS and the Growing Trend of Sustainable Investment Mandates
In a significant move towards sustainable investing, the California State Teachers’ Retirement System (CalSTRS) has awarded a $150 million equity mandate to Ninety One, a global investment manager. This allocation marks CalSTRS’ second sustainability-focused investment in a non-U.S. manager within a few months, following a $450 million mandate awarded to the sustainable Nordea fund in early September. This trend highlights a growing commitment among institutional investors to align financial performance with positive sustainability outcomes.
CalSTRS’ Commitment to Sustainability
CalSTRS, one of the largest pension funds in the United States, has been increasingly vocal about its dedication to sustainability. Kirsty Jenkinson, CalSTRS’ investment director, emphasized that the allocation to Ninety One’s $4.2 billion global environment strategy aligns with the fund’s mission to deliver financial performance while also creating positive sustainability outcomes. This dual focus on financial returns and environmental impact reflects a broader shift in the investment landscape, where sustainability is becoming a core consideration for asset managers and institutional investors alike.
Nuveen’s Global Credit Impact Strategy
In a parallel development, Nuveen has launched a global credit impact strategy, securing an initial investment of $170 million from various investors, including its parent company TIAA and Norwegian pension and insurance firm Gjensidige. This strategy, co-managed by Stephen Liberatore and Jessica Zarzycki, aims to invest in use-of-proceeds bonds from issuers committed to transparent impact reporting. The focus on impact investing underscores the increasing demand for financial products that not only yield returns but also contribute to social and environmental goals.
The UK’s National Wealth Fund Launch
On the international front, the UK government has officially launched its long-awaited National Wealth Fund (NWF), following an interim report published by a government-convened taskforce. The NWF aims to address climate change by investing in clean energy industries, including green hydrogen, carbon capture, and green steel. With an initial reserve of £1.5 billion from a total allocation of £7.3 billion, the fund is designed to catalyze a pipeline of green infrastructure assets. However, there are concerns among UK investors about the maturity of the NWF’s priority investment areas for large-scale investments.
Shareholder Advocacy for Pay Equity
In corporate governance news, nearly 30% of shareholders, including major institutional investors like Norges Bank Investment Management and CalPERS, supported a race and gender pay gap proposal at Procter & Gamble. The resolution, filed by Arjuna Capital, called for the company to report on quantitative median and adjusted pay gaps across race and gender. Despite Procter & Gamble’s recommendation against supporting the proposal, the backing from significant shareholders highlights the growing importance of diversity and equity in corporate practices.
Stewart Investors Joins Responsible Mining Initiative
Stewart Investors has made headlines by becoming the first investment management firm to join the Initiative for Responsible Mining Assurance (IRMA). This multi-stakeholder initiative aims to establish an independently-verified responsible mining assurance system that enhances social and environmental performance. Chris McGoldrick, a senior investment analyst at Stewart Investors, noted that responsible mineral sourcing is increasingly recognized as a strategic imperative for companies and investors across sectors.
The UK’s Pensions Regulator Takes Action on ESG
The UK’s pensions regulator, The Pensions Regulator (TPR), has announced its intention to "constructively challenge" trustee decision-making on environmental, social, and governance (ESG) issues. In a recent blog post, TPR climate lead Mark Hill introduced a new ESG resource for trustees, emphasizing the importance of effective investment governance practices. This initiative reflects a growing recognition of the need for robust ESG frameworks within pension funds.
Findings from the Financial Reporting Council
The Financial Reporting Council (FRC) has released initial findings from its sustainability assurance market study, which indicated that while most UK companies feel they have sufficient choice of assurance providers, there are concerns about potential consolidation around the largest audit firms. Stakeholders have called for a clear regulatory framework for sustainability-related reporting assurance, which the FRC is currently consulting on.
Climate Financial Risk Forum Guidance
The UK’s Climate Financial Risk Forum (CFRF) has published guidance aimed at channeling finance into climate adaptation activities. This guidance includes recommendations for selecting climate scenarios when developing adaptation-focused investment products and creating adaptation-inclusive transition plans for financial institutions. The CFRF’s work underscores the critical role of financial institutions in addressing climate risks.
Central Bank of Oman Promotes Sustainability
In a notable development, the Central Bank of Oman has encouraged regulated banks to integrate sustainability measures, including issuing green financial instruments and providing green loans. While these measures are voluntary, banks must complete a self-assessment checklist and develop an implementation plan by June 2025. This initiative reflects a growing recognition of the importance of sustainable finance in the banking sector.
WWF’s Assessment of Central Bank Initiatives
The World Wildlife Fund (WWF) has released its annual assessment of sustainability-related central bank initiatives, revealing significant progress in banking supervision. However, the report also highlighted that social risks remain inadequately managed, and there is a need for better integration of climate and environmental considerations into monetary policy tools.
Conclusion
The recent developments in sustainable investment, from CalSTRS’ equity mandate to the launch of the UK’s National Wealth Fund, illustrate a significant shift in the financial landscape. As institutional investors increasingly prioritize sustainability, the focus on responsible investing is likely to continue growing. This trend not only reflects changing investor preferences but also underscores the critical role of finance in addressing global challenges such as climate change and social inequality. As the momentum builds, it will be essential for stakeholders across the financial ecosystem to collaborate and innovate in order to drive meaningful progress toward a more sustainable future.