The California State Teacher’s Retirement System (CalSTRS), the second-largest pension fund in the U.S. has joined the Enhanced Analytics Initiative (EAI)- the first major U.S. public fund to do so.
EAI is an international collaboration of asset owners and asset managers aimed at encouraging investment research that considers the impact of social and environmental issues on long-term company performance.
CalSTRS provides retirement, disability and survivor benefits to California’s 776,000 public school educators from kindergarten through to community college. In joining EAI, CalSTRS, whose assets total US$156 billion, increases the Initiative’s total assets under management to approximately Euro 1.3 trillion (US$1.8 trillion). Christopher Ailman, Chief Investment Officer of CalSTRS, said: “CalSTRS has longed advocated, both to regulators such as the SEC and investment managers and securities analysts, for increased disclosure and analysis on material risks such as climate change. Membership in a network like EAI reinforces that investment policy aim and signals to our partners in the investment profession that this is a core issue for the fund. It is important for mainstream investment professionals and investors to be fully informed on issues that have value implications for the portfolio, and by extension, for our members.”
Peter Moon, Chief Investment Officer of the Universities Superannuation Scheme, one of the founder members said, “CalSTRS’ membership is a strong signal that the call for greater extra-financial analysis is undeniably an international priority. It is not only important to the fund management community, for many, it is becoming an economic imperative. We are delighted that such an important institution has put its name behind the Initiative and look forward to more U.S. organisations following suit.”
About the Enhanced Analytics Initiative
EAI incentivises research providers to compile better and more detailed analysis of extra financial issues within mainstream research. Its impact depends on offering credible market incentives to interested and appropriate research agencies to encourage them to adapt their research process and to become more innovative.
The current members are ABP Pension Fund, AGF Asset Management, Batirente, BNP Paribas Asset Management, BT Pension Scheme, Calvert, CPP Investment Board, Generation Investment Management, Governance 4 Owners, Hermes Pensions Management, Investec Asset Management, La Banque Postale Asset Management, London Pension Fund Authority, MetallRente, Mistra, PGGM, RCM – Allianz Global Investors, Robeco, SNS REAAL, Trades Union Congress (TUC) Superannuation Society, UniSuper and the Universities Superannuation Scheme (USS).
Analysis indicates that a substantive part of a company’s value is related to its extra-financial performance or intangibles. Extra-financial issues are best described as fundamentals that have the potential to impact companies’ financial performance or reputation in a material way, yet are generally not part of traditional fundamental analysis. Extra-financial issues typically include, but are not limited to, climate change, corporate governance, employment standards, human resources, executive remuneration, environmental and social areas and reputation risk. They may be specific to a company, an industry or cut across several industry-groups.
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