The State Investment Council (SIC), which oversees the Division of Investment, adopted its Environmental, Social and Governance (ESG) Policy in 2018. The policy recognizes that material ESG factors are an important component of a comprehensive investment management strategy, and an analysis of these factors should be applied by the Division in connection with the investment and evaluation of the Pension Fund's assets.
As long-term investors, the Division recognizes sustainability is core to its role as a fiduciary and that climate change can have a material impact on the financial results of a wide range of investments. With a focus on sustainability to drive long-term shareholder value, the Division assesses the risks and opportunities presented by climate change and the transition to a low carbon economy across the Pension Fund.
This Division of Investment integrates ESG considerations across the entirety of the Pension Fund's assets. From proxy voting to corporate engagement and direct investments through manager selection, the Division believes incorporating ESG factors into its responsible investment practices will help improve long-term returns for fund beneficiaries. It expects that by appropriately measuring and managing financially-material ESG metrics at the investment level while monitoring ESG integration at the manager level, it will help enhance returns and mitigate risk for the Fund over time.
The Division views sustainability in a holistic manner. Climate change presents risks and opportunities across a spectrum of asset classes, economic sectors and geographic markets and the Division takes this complexity into its sustainable investment approach. In our view, the best strategy to mitigate financially-material climate-related risk in pension fund portfolios is through active ownership. Engagement and advocacy around sustainability issues encourage positive corporate behavior.
To leverage its impact, the Division works closely with coalitions, partners, and other institutional investors in its sustainability efforts. For example, the Climate Action 100+, of which the Division is a member, represents a coalition of 615 global investors and asset owners with more than $55 trillion in assets under management, who collectively can affect greater change with the world's largest greenhouse gas (GHG) emitters. The Division advocates for greater disclosure of GHG emissions and other financially-material ESG risks under the Sustainable Accounting Standards Board (SASB) standards and the Task Force on Climate-related Financial Disclosures (TCFD) framework.
Principles and Practices Regarding Climate Change
The Division of Investment recognizes the benefits of diversity & inclusion in the companies in which it invests and the advisors that invest on behalf of pension fund. Diversity of background, experience, and thought at the corporate board level and across the workplace create a more resilient business and help mitigate social-related risks to their enterprise. In evaluating investment opportunities, to the greatest extent feasible, the Division undertakes a Diversity & Inclusion analysis to evaluate racial, ethnic, and gender diversity of its investment partners. Consistent with its fiduciary duty, the Division seeks to hire the best qualified candidate for each opportunity.
The Division publishes its proxy voting record to provide stakeholders with greater transparency into its actions. These votes are for information purposes only and not intended as investment advice.
From time to time, various third parties may express an interest in providing input regarding the Division's ESG policy or its practices. The Council recognizes that ESG issues are complex and cover a wide range of subject matter and, therefore, information provided by third parties can be beneficial. In order to facilitate such communication, the Division has established an electronic process to allow third parties to bring ESG concerns to the attention of the SIC and the Division.