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We Engage to Protect Our Investments

CalPERS CEO Marcie Frost

A Message from CEO Marcie Frost

Paying member benefits for generations is CalPERS’ core mission. Every decision we make is done with this in mind. That is why when we invest in a company, we don’t only want them to do well in the short term, but we hope they will provide profitable returns for decades.

One way we do this is by engaging with the companies we own. This strategy is critical to achieving strong returns. It involves having open and honest dialogue with company leaders and voting on resolutions at annual shareowner meetings. We must ensure our investments are well taken care of now, so that they will continue to grow in the future.

Many times, we’re talking with companies around environmental, social, and governance issues, commonly referred to as ESG. This includes topics like reporting on the effects of climate change, labor safety concerns, and board diversity.

I understand when some members and other groups hear about our engagement efforts and are concerned that investment returns are not our top priority. They sometimes think we’re trying to advance a political agenda or act as social warriors on behalf of a well-meaning cause. I hear what they’re saying, but what we are actually doing is paying attention to all the risks that could hurt our returns. We don’t see it as an “either/or” choice — ESG or returns — but rather risk factors that must be addressed to ensure positive returns for the long haul.

That is why we talk with the companies we invest in. For example, if a company doesn’t mitigate labor safety concerns, they’re exposing themselves to potential lawsuits and regulatory penalties. If a company isn’t tracking how changes in the climate could impact their business, they’re more vulnerable to major losses due to natural disasters. And if a corporation doesn’t have a board of directors made up of individuals with diverse backgrounds and experience, they’re more likely to have blind spots and miss potential issues that could have been avoided.

At CalPERS, we see a bigger picture. It’s our job as an investor to allow companies to operate in a way that ensures they return the most profit to shareowners over the long term. That means, when necessary, we engage companies on issues that we believe will ultimately impact their financial performance. For us, everything is about understanding risks that could affect the bottom line.

Our members and their pensions always come first. We’re dedicated to improving the performance of the companies in which we invest, and we are always mindful that our job is to secure retirement benefits for our 1.9 million members.