World’s leading proponent of responsible investment creates a blueprint for California investors and policymakers to advance ESG integration in investment decision-making throughout the state’s economy
LONDON - Today, the United Nations-supported Principles for Responsible Investment (PRI) released The California Responsible Investment Roadmap, a set of guidelines outlining how California investors and policymakers can advance the incorporation of Environmental, Social and Governance (ESG) considerations into investment decisions that impact the state’s economy, especially with regard to climate change.
The report from the PRI, a global organization of over 3,000 signatories with more than $100 trillion in assets under management, was developed in collaboration with Berkeley Law’s Center for Law, Energy & the Environment (CLEE). Given the size of California’s economy and the demonstrated willingness of state policymakers and financial regulators, fiduciaries and asset owners to pursue more sustainable business practices and public policymaking, the report identifies California as an ideal setting to pick up the pace of progress on responsible investing in the United States.
“California’s record on sustainability issues serves an excellent example of climate mitigation efforts both in the United States and globally, and the wildfires currently raging across the state are a tragic reminder of the importance of those efforts,” said PRI CEO Fiona Reynolds. “As lawmakers and business leaders in California continue to make strides towards a more sustainable future, PRI’s roadmap can provide guidelines and effective tracking methods for investors looking to integrate ESG issues in their decision making.”
The PRI’s California roadmap makes 40 recommendations across seven categories. High priority recommendations from the report include:
- The State of California, led by the Governor or State Treasurer or State Controller, should convene a Task Force on ESG Integration in Investment.
- The state legislature should direct mandatory climate risk stress testing for financial institutions (state-chartered banks, credit unions, mortgage lenders, and others) under the jurisdiction of the Department of Business Oversight.
- Public pension funds should develop governance structures that encourage better long- term and data-driven ESG investment decision-making.
The report maintains that California has the opportunity to be a leader in advancing responsible investment practices and policies both at the state and national level in the United States, pointing to its efforts at international collaboration around solutions to climate change mitigation and adaptation, such as clean energy development, investing in green infrastructure, and greenhouse gas emission reduction.
Fiona Ma, California State Treasurer commented: “In this time of economic challenge and terrifying wildfires, investors are more conscious than ever of the intersection between environmental issues, risk and return, and real world outcomes for public money entrusted to our care,” said State Treasurer Fiona Ma. “By developing effective ways to bring investment goals and climate policy together, policymakers can profoundly affect our quality of life now and in the future. The Roadmap shows all of us the pathway to an envisioned future that seizes the initiative on climate-related finance. A thoughtful review of the Roadmap will reinforce prudent stewardship in investment decision-making and policy implementation. It is an important statement of why California’s climate strategies are so important to all of us.”
Ricardo Lara, California Insurance Commissioner commented: “I commend the authors for taking such a focused approach on responsible investment. The California Roadmap aligns with our core goals at the California Department of Insurance and is a clear step forward on the pathway to addressing climate risks and promoting sustainability in the financial and insurance sectors.”
Sharon Hendricks, Vice-Chair, CalSTRS Teachers Retirement Board, a PRI signatory, and PRI Board member, commented:” A healthy economy hinges on a healthy society and environment. As a native Californian, labor leader, fiduciary and trail runner, I’ve experienced in my personal and professional life the ways in which environmental, social and governance issues such as labor standards, board diversity and climate change pose material risks and also provide significant opportunities. While federal financial regulators take steps backwards in ensuring the US financial system’s sustainability, California, as always, has an opportunity to lead by example. My hope is that the work of the PRI and this California Responsible Investment Roadmap will serve as a GPS system - to guide all institutional investors towards best practice incorporation of material ESG factors in investment and stewardship policy and practice.”
The PRI works with its international network of signatories to put the six Principles for Responsible Investment into practice. Its goals are to understand the investment implications of ESG issues and to support signatories in integrating these issues into investment and ownership decisions. The six Principles were developed by investors and are supported by the United Nations. The PRI does not operate for its own profit; it engages with global policymakers but is not associated with any government; it is supported by, but not part of, the United Nations.