Do you ever stop and wonder about what type of investments your pension plan invests in? Environmental, Social and Governance (ESG) is one of the factors that goes into deciding what type of investments the Public Employees Pension Plan (PEPP) chooses to engage in.
ESG is also known as sustainable investing. It is a set of standards for a company’s operations that socially conscious investors use to screen potential investments. An investment manager looking at ESG factors of an investment could consider environmental criteria such as a company’s energy use, waste, and pollution. Social investing looks at factors of a company’s business relationships such as: does it work with suppliers that have similar values, or does the company have a high regard for employee health and safety? Governance looks at if a company is transparent, if there are any conflicts of interest, or if stockholders can vote on important issues.
Many of PEPP’s traditional investment managers implement ESG processes within their firms because they realize that ESG can create value for shareholders over the long term. Whenever a new investment manager is considered for PEPP, ESG factors are reviewed and considered by the Public Employees Pension Board (the Board).
One investment manager with PEPP who has strong ESG polices is Maj Invest. Their focus is on financial inclusion and developing the banking sector for the poorest part of the world’s population, enabling the allocation of capital for productive use to entrepreneurs and small businesses (https://majinvest.com/media/27624/esg-impact-report-2018-19.pdf). Additionally, many of PEPP’s investment managers are a part of the UN Principles for Responsible Investment (PRI), an international organization that works to promote the incorporation of ESG into investment decision making.
ESG is just one part of what goes into choosing what type of investment managers PEPP invests with. For a complete look at how PEPP makes its investment decisions, see the Statement of Investment Policies and Goals (SIP&G) in the Investment, Publications section on our website. You can also find a list of all the investment managers PEPP is currently invested with under the Investments, Publications section.