States and Pro-ESG Activity (Update - 12/2023)
This update, the first monthly edition, highlights recent developments regarding ESG initiatives in various U.S. states, particularly in the context of pension plans. It outlines personnel changes, legislative actions, and policy shifts that signify a growing focus on sustainability in managing pension funds. This is more than a data collection; it reflects a significant pivot towards a stewardship-focused and responsible investing approach within the pension system, acknowledging and addressing the challenges of climate change. We see states taking bold strides toward sustainability and intentional stewardship, redefining how pension funds are invested.
Climate change poses significant financial risks; a stewardship-focused approach improves risk management and focuses on long-term sustainable returns crucial for the viability of pension funds and investors' financial security. It creates an opportunity for stakeholders within the pension system to become advocates for responsible investing practices within their portfolios and across the broader investment community.
California
Personnel Updates:
2023 CalPERS announced its plans to add 10 people to its sustainability staff.
CalSTRS is exploring different indices for its fixed income portfolio.
LACERA commits to acting on the systemic risk of climate.
LACERS updated its proxy voting guide to include director votes.
Key Pro-ESG bills or pension policies
California Senate Bill 253. Senate Bill 253 Mandates climate-related disclosures for public and private companies doing business in California.
California Senate Bill 261. Senate Bill 261 applies to businesses with annual revenues over $1 billion and requires them to disclose their Scope 1, 2, and 3 greenhouse gas (GHG) emissions annually.
2023 CalPERS trustees call for Labor Principles and those will likely be enacted.
Illinois
Personnel Updates:
Treasury is building out its sustainable investing team with new hires including Deputy Director of Corporate Governance and Sustainable Investment and a Director of Public Assets
Michael W. Frerichs - Illinois State Treasurer: Sustainable Investing
Key Pro-ESG bills or pension policies
2023 30 ILCS 238/ Illinois Sustainable Investing Act. A public agency shall prudently integrate sustainability factors into its investment decision-making, investment analysis, portfolio construction, due diligence, and investment ownership in order to maximize anticipated financial returns, minimize projected risk, and more effectively execute its fiduciary duty.
2020 Sustainable Investing Act
2023 adjustments around biodiversity, governance, and a specific call out for climate classifying it as a systemic risk. Updated Proxy Voting Guidelines
Massachusetts
Personnel Updates:
MassPRIM built out governance staff and created a new position, Director of Stewardship that reports up to the Deputy Chief Investment Officer.
In October 2023, MassPRIM launched its Stewardship webpage. Stewardship and Investments | PRIM
Key Pro-ESG bills or pension policies
In 2022 MassPRIM enacted a charter and structure for its ESG Committee, now known as the Sustainability and Stewardship Committee chaired by the state treasurer.
October 2023 MassPRIM ESG Committee proposes Stewardship Principles. These will be voted on in January 2024.
Maryland
Personnel Updates:
The State Comptroller’s office added two positions, climate resilience director and investment research officer.
MSRPS hired a Senior Governance Manager in late 2022.
Key Pro-ESG bills or pension policies
In 2022 House Bill 740 State Retirement and Pension System – Investment Climate Risk – Fiduciary Duties requiring a fiduciary of the State Retirement and Pension System to consider certain climate risks on the assets of the several systems to ensure a long–term sustainable portfolio.
The Climate Solutions Now Act of 2022 | Gordon Feinblatt LLC.
The Maryland State Retirement Pension System (MSRPS), completed its Risk Assessment Study by Meketa released in February of 2023
Minnesota
Personnel Updates:
The Auditor's office will retain Meketa to provide further analysis as they move to a concrete action plan.
The Auditor’s office is hoping to expand its enterprise risk staff.
Key Pro-ESG bills or pension policies
In May 2022, the State Board of Investment adopted a resolution supporting the SEC proposed transparency rule around climate risk. In August, they received an analysis of the SBI’s climate exposure.
Meketa reports outlined policy pathways for implementing a successful climate transition strategy. Please note, Meketa’s work is responsive to CFA’s third and most important “Policy Pathways.”
Colorado
Key Pro-ESG bills or pension policies:
In 2023: SB 23-016 passed - a wide-ranging bill that strengthens Colorado’s commitment to cut statewide climate pollution beyond 2030. It would put new targets in law requiring economy-wide emissions cuts of at least 65% by 2035, 75% by 2040, 90% by 2045, all below 2005 levels, and strengthen the state’s 2050 target to achieve net-zero greenhouse gas emissions by 2050.
Washington
Personnel Updates:
The Treasury created a new position through a 2022 budget provision and hired an ESG policy analyst. Washington State Investment Board added a second corporate governance position.
Key Pro-ESG bills or pension policies:
In 2022 Washington State Investment Board issued: Climate Change Blueprint: Nationally and in Washington State
Oregon
Personnel Updates:
The Treasury created a new position and hired an investment stewardship officer.
December 2023 the Treasury launched a proxy voting disclosure database. Proxy Voting Disclosure Website
Key Pro-ESG bills or pension policies:
Treasurer Read’s Core Decarbonization Framework: Commitment by Treasurer Read to develop and present a proposal in early 2023 to the Oregon Investment Council to transition OPERF to 50% decarbonization across the total portfolio by 2035, and net zero total portfolio level GHG emissions by no later than 2050, consistent with OST's and OIC's fiduciary duties.
