CalPERS Becomes First U.S. State Pension Fund to Recognize Deforestation as Material Risk
As a pioneer in impact investing, Green Century has worked with corporations to improve their environmental practices for more than a quarter of a century.
Since 2012, Green Century has engaged companies to stop the logging and burning of tropical rainforests – including by companies in their supply chains – to curb climate change and mitigate potential financial risk.
Increasingly, other investors have started acting on this issue – and, now, one of the biggest investors in the country has too.
On July 18, 2018, the California Public Employees’ Retirement System (CalPERS) became the first U.S. state pension fund to recognize deforestation and ecosystem degradation as material risks to be considered in its investment decisions.
CalPERS is not just any pension fund. With $355 billion in assets under management (as of July 11, 2018), it is the largest state pension fund in the country.
The newly revised CalPERS Total Fund Investment Policy states:
Companies should identify and manage material environmental risks and opportunities that are relevant to their short and long-term success. Environmental issues may include the following:
Company impact on the environment: Potential regulatory change, liability, license to operate, reputational or market access risks posed by the company’s environmental impacts, including emissions, pollution, waste, loss of biodiversity, degradation of natural ecosystems (e.g. deforestation).
This consequential announcement could help support ongoing investor efforts, including Green Century’s shareholder advocacy work with the United Nations Principles on Responsible Investment, to eliminate deforestation from global agricultural supply chains.
This announcement is especially noteworthy given CalPERS’ large holdings in the food, forest products and paper, and agriculture industries, totaling approximately $2.3 billion invested in at least 189 companies. The companies exposed to the forest-risk commodity supply chains driving global deforestation – including those of palm oil, soy and cattle – operate in these industries.
CalPERS’ influence as the largest U.S. state pension fund may also help pressure other state pension funds and institutional investors to recognize deforestation as a material risk.
Green Century applauds CalPERS’ decision to recognize deforestation and ecosystem degradation as material risks to be considered in its investment decisions and is hopeful that other U.S. pension funds follow suit.
Green Century is a longtime leader in forest protection and has worked with dozens of other investors and companies to adopt practices and policies to protect tropical rainforests. To read more about Green Century’s shareholder advocacy work, visit our Impact page.
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