In concert with its implementation partners - CalSTRS, the NY State Comptroller, and Prudential Investment Management - Ceres will engage members of the INCR on the successful implementation of the ten action steps outlined in its investor blueprint, designing customized engagement strategies for each member, taking into account the types of assets under management. The specific focus will be to guide INCR members on the integration of ESG factors into investment policies and practices, helping INCR members to change their investment practices in this area. Through such change, INCR members will have a significant influence on the sustainable investing field and will help facilitate positive ESG outcomes through investment decisions.
In addition, Ceres will raise awareness of the imperative for sustainable investing through various events, webinars and print media and social media opportunities directed at a broader audience. Ceres will leverage its tremendous convening power to ensure that its message reaches a wide audience. For example, the blueprint will be prominently featured at Ceres' Investor Summit on Climate Risk at the UN in New York City on January 15, 2014. In addition, Ceres will draw upon its ties to major environmental and mainstream news outlets to further amplify its message through these media channels.
Ceres brings almost a quarter century of experience to this commitment and has considerable staff expertise upon which it will draw. Report co-author Peter Ellsworth has more than twenty years experience in the capital markets, working with investors, asset managers and corporations designing investment structures and risk management solutions. In addition, Ceres has recently recruited Mark Fulton as Senior Advisor to our investor team. Most recently, Mark was head of research at Deutsche Bank Climate Change Advisors, where he produced thought leadership papers for investors on climate, cleaner energy, and sustainability and advised investment teams on asset management.
Ceres' investor team will help INCR members implement the 10 action steps in the blueprint, as follows:
1) Establish a Commitment to Sustainable Investing through a Statement of Beliefs
2) Establish Board Level Oversight of Sustainability Policies & Practices
3) Identify Sustainability Issues Material to the Fund
4) Evaluate Asset Allocation for Material Sustainability Risks
5) Select an Investment Strategy & Integrate Sustainability Criteria
6) Require Sustainable Investment Expertise in Manager & Consultant Procurement
7) Evaluate Manager Performance Against Sustainable Investment Expectations
8) Establish Engagement Strategies & Proxy Voting Guidelines
9) Support Policies & Market Initiatives that Promote a Sustainable Global Economy
10) Integrate Sustainable Investment Criteria Across All Asset Classes
Recruitment of Additional INCR Members
In order to increase the impact of the commitment, Ceres will recruit additional INCR members.
- 2 Private Equity Managers
- 2 Major Fixed-income Managers
- 2 Major Equity Managers (i.e. Northern Trust, Allianz)
- 1 Major real estate manager
- 1 Infrastructure manager
- 1 Teacher's Fund
- 1 Large City Fund
- 1 New State Treasurer
- 2 New State Pension Funds
The timeline for Ceres' implementation steps will be as follows:
Q3, 2013-Q3, 2015: Engagement with INCR members on ESG incorporation into investment decisions
Q3, 2013-Q3, 2015: Recruitment of new INCR members
Q4, 2013: First webinar on blueprint topic, featuring investor partners
Q1, 2013: Ceres' Investor Summit and pre-Summit INCR meeting, featuring the blueprint
2014: Quarterly webinars on blueprint topics, featuring investor partners
Q1, 2015: Ceres Gala, highlighting investor progress in blueprint
Q3, 2015: By this date, significant sustainable investing progress by INCR members
On a continual basis during the two-year period of the commitment, Ceres will work closely with its investor partners to publish articles, op-eds, and blogs in environmental and mainstream media outlets.
Sustainable investing has edged closer to the mainstream over the past five years, with forward-thinking investors realizing that environmental, social, and governance factors are not off-balance sheet 'extra-financial' risks but rather are highly material to investment returns and must be integrated into investment decisions. For example, the number of signatories to the Principles for Responsible Investment has increased dramatically since 2007, now numbering 1,205 asset owners, asset managers, and professional service partners worldwide. However, many signatories lack a coordinated plan of action on integration of sustainable investing, past the point of becoming a signatory.
While a number of asset owners and asset managers have some internal champions of sustainable investing, these proponents often lack the institutional support to implement a sustainable investing strategy. There is still widespread belief in the investment world that attention to 'extra-financial' risks (such as ESG factors) conflicts with fiduciary duties. In the case of a crisis, the particular ESG factor implicated is incorporated into future investment decisions, but there is less focus on proactive strategies on sustainable investing.
Increased awareness of the ESG imperative would help create a new paradigm in the investment community, under which investors would actively integrate ESG issues into investment decision-making. For example, as a leading ESG issue, climate risk would be recognized as the material risk it is. Climate risk is the investment risk stemming from the myriad impacts of climate change. This risk takes myriad forms, the main three being regulatory risk, competitiveness/reputational risk, and physical risk. Beyond impacting investors at the portfolio level, climate risk impacts the economy as a whole. Investors would integrate this risk into investment policies and practices. The proliferation of ESG incorporation would facilitate the growth of the field, necessary further development of sustainable investment infrastructure, and adoption of best practices in sustainable investing.
Ceres continues to seek financial resources for the continuing rollout of its 21st Century Investor Blueprint. Ceres is seeking financial resources in support of its investor team's engagement efforts with major asset owners, asset managers, and professional service providers on how to effectively implement the ten action steps on sustainable investing that are outlined in the blueprint and for events/webinars on the subjects detailed in the blueprint. In addition, Ceres is seeking media support to amplify its message that sustainable investing is a financial imperative for all investors, and for its investor partners' progress on the action steps outlined in the blueprint.
Ceres continues to offer programming on the nine steps of its 21st Century Investor Blueprint. Through a series of webinars and events, Ceres is providing investors with guidance on how to implement a sustainable investing strategy. These webinars and events are open to the members of Ceres' Investor Network on Climate Risk, and space permitting, also available to members of the CGI community.