Our Partnership for Sustainable Capital Markets

As asset owners, our ultimate responsibility is to provide for the post-retirement financial security of
millions of families across multiple generations. Since our commitment to providing financial stability
spans decades, we do not have the luxury of limiting our efforts to maximizing investment returns
merely over the next few years.
If we were to focus purely on short-term returns, we would be ignoring potentially catastrophic
systemic risks to our portfolios. For instance, according to one estimate by Moody’s Analytics, climatechange alone has the potential to destroy US$69 trillion in global economic wealth through 2100. 1 As
asset owners with the longest of long-term investment horizons, more inclusive, sustainable, dynamic,strong and trusted economies are critical for us to fulfill the responsibility we have to multiple
generations of beneficiaries.
Within this multi-decade framework, companies that seek to maximize corporate revenue without
considering their impacts on other stakeholders – including the environment, workers, and communities– put their long-term growth at risk and are not attractive investment targets for us. Similarly, asset
managers that only focus on short-term, explicitly financial measures, and ignore longer-termsustainability-related risks and opportunities are not attractive partners for us.
Over recent years, we have seen more and more corporations and asset managers embrace the longterm approach to value creation that is required by asset owners. Individual firms and industry groups
are rethinking their purpose, recognizing that considering impacts to employees, society and theenvironment in their corporate vision and strategy is good business. A growing number of companies
are disclosing information in line with frameworks such as the Task Force on Climate-related Financial
Disclosures (TCFD) and the Sustainability Accounting Standards Board (SASB). And influential asset
managers are committing to integrating systemic risk issues, including climate change, into theirinvestment activities.
We welcome these efforts but recognize that we still have a long way to go. Entrenched interests
remain strong and resistance to change is fierce. Meaningful and decision-useful ESG (environmental,social and governance)-related disclosure and analysis remains the exception rather than the rule. Andin many regions, regulations that reflect a more long-term investment paradigm have been slow toevolve.
For our part, we are committed to those companies that create value for us over the long-term. We
appreciate that many multinational firms often find themselves under excessive pressure from themarket to deliver on short-term goals, making it difficult to protect their long-term corporate vision. As
asset owners however, we strive to act as stewards of long-term capital, creating sustainable value by
supporting companies with a clearly defined, long-term vision for growth.
Similarly, asset managers that integrate ESG factors throughout their entire investment process, voteaccording to the mandate to which they have pledged, and are transparent with us about their level of1

Moody’s Analytics (2019). The Economic Implications of Climate Change. https://www.moodysanalytics.com/-/media/article/2019/economicimplications-of-climate-change.pdf

corporate engagement, demonstrate to us that they are committed to long-term value creation in linewith our interests. We prefer to build and maintain relationships with asset managers who fit thisdescription over those who do not, and pledge to work with these partners to hold them accountableand ensure they deliver on the commitments they have made.
Skeptics that continue to question the growing role of sustainability within the global investmentcommunity should realize that they are quickly becoming the minority. With a large majority of researchin a meta-analysis 2 of over 2200 studies showing a positive relationship between ESG investment andreturns – and around 90% showing at least a non-negative effect – they should also be aware that theevidence is not on their side.
We live in a changing world; companies and asset managers who commit to sustainable value
creation are not injecting politics into business, nor are they “virtue signaling.” They are fulfilling their
duty to us, and by extension, to the millions of families depending on us. We therefore urge both ourpartners and the companies in which we invest to rethink their strategy and enhance their disclosures(using frameworks such as the TCFD) regarding their interactions with stakeholders, society, and theenvironment so that we can collaborate in generating and enhancing long term value.
With companies acting as long-term value creators and investors acting as long-term value
accelerators, together we can keep short-termism at bay and drive sustainable economic growth for ourcustomers, beneficiaries and society.

March, 2020

2Christopher J. Ailman
Chief Investment Officer

Hiromichi Mizuno
Executive Managing Director andChief Investment Officer

Simon Pilcher
Chief Executive

California State Teachers’Retirement SystemGovernment Pension
Investment FundUSS Investment
Management Ltd

Friede, G., Busch, T. and Bassen, A. (2015), ‘ESG and Financial Performance: Aggregated Evidence from more than 2000 Empirical Studies’, Journal of
Sustainable Finance & Investment, Vol. 5, Issue 4, pp. 210–233. Available at: https://www.tandfonline.com/doi/full/10.1080/20430795.2015.1118917.