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CalSTRS Investment Policy

The following material consists of text extracted from the 301 pages of the CalSTRS policy manual. The extracted material represents only the CalSTRS policy regarding environmental, social and geopolitical risks.

Teachers' Retirement Board Policy Manual

(Updated September 2010)


Environmental, Social and Geopolitical Risks (ESG) – CalSTRS Investment Portfolio operates in a unique and complex social-economic milieu, and the Board expects its staff and investment managers to select investments after a careful investigation and deliberation of the risks versus the potential return. To assist staff and investment managers, the Board has promulgated a partial list of risks to be considered that are of particular concern to the System, this list and the ESG policy are included as Attachment 1 to this Policy.

(Ed. Note: The reference to Attachment 1 in the paragraph above appears to be a reference to Attachment A.)

Attachment A:
Investment Policy for Mitigating Environmental, Social, and Geopolitical Risks (ESG)


Geopolitical Risks and Social Risks: To help manage the risk of investing a global portfolio in a complex  geopolitical environment, CalSTRS has developed a series of procedures to follow when faced with any major geopolitical and social issue as identified by the 21 risk factors.  It is important to note that fiduciary standards do not allow CalSTRS to select or reject investments based solely on social criteria.

When faced with a corporate decision that potentially violates CalSTRS Policies; the Investment Staff, CIO and Investment Committee will undertake the following actions:


The CIO will assess the gravity of the situation both as an ESG risk and as to the System. The extent of the responsibility of the System to devote resources to address these issues will be determined by: 1) the number of shares held in the corporation, and 2) the gravity of the violation of CalSTRS Policies.


At the CIO's direction, the Investment Staff will directly engage corporate management to seek information and understanding of the corporate decision and its ramifications on ESG issues.


The CIO and investment staff will provide a report to the Investment Committee of the findings and recommend any further action of engagement or need to commit further System resources. The Investment Committee can marshal further resources given the gravity of the situation.

To assist CalSTRS Staff and external investment managers in their investment analysis and decision-making, CalSTRS has developed a list of 21 risk factors that should be included within the financial analysis of any investment decision. This list is not exhaustive and does not attempt to identify all forms of risk that are appropriate to consider in a given investment transaction; however they do provide a framework of other factors that might be overlooked. These risk factors should be reviewed for an investment in any asset class whether within the U.S. or across the globe.

CalSTRS expects all investment managers, both internal and external to assess the risk of each of the following factors when making an investment. The manager needs to balance the rate of return with all the risks including consideration of the specific investments exposure to each factor in each country in which that investment or company operates.