Investing $20tn to change the world

How sovereign wealth and government pension funds can bring about a sustainable global economy

Photograph: Alamy Stock Photo

Last April, the California Public Employees’ Retirement System (CalPERS) sent a letter to 504 public companies with no women on their boards of directors. The $330bn pension fund asked, “that each company develop and disclose its corporate board diversity policy and implementation plan to address the lack of diversity.”

“Simply put, board diversity is good for business,” said Anne Simpson, CalPERS investment director, sustainability, at the time, in a news release. “It is essential in today’s global economy that boards avoid ‘group think’ and ensure there is the breadth of experience, skills and knowledge necessary to meet complex business needs.”

This type of action is becoming almost commonplace. It is not just related to gender diversity but to a whole range of environmental, social and governance (ESG) issues.

BlackRock, the world’s largest asset manager, recently made climate risk a top priority in engaging with corporations. It says that all directors of companies facing climate risk – such as mining and oil firms, for example – should “have demonstrable fluency in how climate risk affects the business.” (pdf) It has also openly opposed practices at Exxon Mobil over climate change – and it owned about 6% of Exxon stock at the time.

These are huge shifts. Board diversity and climate change are now fundamental to both CalPERS and BlackRock’s investment decisions – so much so that they are willing to put companies they invest in who do not meet their expectations on notice that they must change. This is starting to impact corporate priorities. But even they can’t drive this shift alone.

Read the full article on The Guardian