Case study by CalPERS
Bringing ESG to the LPAC
Since 2016, the Private Equity group at CalPERS, the California Public Employees’ Retirement System, has used its role on funds’ Limited Partner Advisory Committees (LPACs) to inquire regarding the management of ESG issues by the top 10 relationships by value. While CalPERS’ top 10 relationships tend to have ESG on their annual meeting and/or LPAC agenda, if this is not the case CalPERS will raise it during the meeting. By raising ESG issues, CalPERS reinforces its expectations regarding responsible investment.
CalPERS requests disclosure on:
- GPs’ ongoing processes for identifying and acting on ESG-related opportunities and risks;
- Material ESG issues that may impact the value of the portfolio, for example climate change risk; and
- Any new or ongoing litigation issues pertaining to ESG.
GPs are typically required by the terms of the Limited Partnership Agreement (LPA) to disclose any material litigation; however, by asking the ESG question, CalPERS is demonstrating the seriousness with which it regards these issues, given their potential for material financial and reputational impacts.
For all other managers, CalPERS private equity staff document in periodic meeting notes any ESG-related issues of which they become aware.
ESG monitoring, reporting and dialogue in private equity
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Case study: CalPERS