ITEM NAME: Corporate Engagement: Enhanced Focus List Strategy
PROGRAM: Global Governance and Global Equity
ITEM TYPE: Total Fund – Information
The purpose of this item is to provide an update on work to enhance the Focus List Program (Program). In November 2014, the Investment Committee (Committee) approved the Enhanced Program which provides for greater scale and impact while leveraging partnerships with CalPERS’ external equity managers.
In early 2015, Japan was selected for a concentrated market engagement. The rationale for this engagement is that Japan is CalPERS’ second largest investment market and there is an opportunity due to recent market governance reforms, our history of activity, poor capital efficiency relative to other developed markets, and increasing foreign ownership.
In spring 2015, staff carried out initial in-person company meetings in Japan with Executive Management and company Board Members to assess potential. Subsequently, staff followed up with each company by letter requesting specific governance reforms. Company responses are pending.
Staff intends to report back to the Committee in 2016, with progress of the company engagements in a case study format.
Attachment 1 provides an Enhanced Focus List implementation update in greater detail.
This item supports the CalPERS Strategic Plan goal to improve long-term pension and health benefit sustainability. The Program is an investment strategy which aims to improve the risk-return profile of the CalPERS Total Fund by enhancing sustainable value creation through improvement of financial, physical, and human capital management practices at engaged companies.
This item supports the following CalPERS’ Investment Beliefs:
Investment Belief 2, regarding the responsibility and advantage of a long-term investment horizon and the sub-beliefs which require that CalPERS encourage companies and external managers to consider the long-term impact of their actions.
Agenda Item 7a
September 15, 2015
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Investment Belief 4, that long-term value creation requires effective management of three forms of capital: financial, physical and human.
Investment Belief 6, specifically the sub-belief that CalPERS will consider investment strategies if they have the potential to have a material impact on portfolio risk and return.
Corporate Engagement Enhanced Focus List
Program Strategy Update