CalPERS Pushes Ecology, Diversity

Last Updated Apr 28, 2008 12:15 PM EDT

The footprint of concerned institutional investors trying to do the right thing just gets larger.

CalPERS, the California state pension fund wielding assets of $240 billion, has expanded its guidelines for companies in its portfolio to include minimizing climate risks and advocating more diversity among employees and suppliers. The Sacramento-based fund will be working with the Investor Network on Climate Risk to survey investment managers on whether their investment picks take into account impacts on global warming and whether drawing up a list of best practices might help.

Another goal is to encourage more diversity among corporations in which they invest. One way of telling is whether the firm has a C-level Corporate Diversity Officer that has easy access to to other C-Suite members. If they do, it will be easier for them to communicate with and get action from the COO, CFO and CEO to make sure that the firm is recruiting minorities, tapping minority markets and making sure that the company uses minority vendors.

Although CalPERS didn't explicitly say so, one area for concern for environmentally safe investments is whether institutions back utilities or construction firms that are heavily involved with new coal-fired generation plants. As electric generating capacity wears out and the economy expands, demands are strong for new power plants. About 100 new coal-fired plants are on the drawing boards, but they have attracted negative attention since their carbon footprints tend to be very large.

The concern has caught the eyes of Interfaith Center for Corporate Responsibility which includes about 300 faith-based institutional investors representing more than $100 billion in assets. A recent report they backed -- "Don't Get Burned: The Risks of Investing in New Coal-Fired Generating Facilities" -- lays out a case against such investments. Besides being highly polluting, such plants may be jeopardized because of high construction costs, untested new pollution technologies and the uncertainty of federal policy on doling out greenhouse gas credits.

My take: CEOs and other top managers had better take this seriously, regardless of how Goody-Two-Shoes it may seem. If they don't, they could get pummeled by public opinion. The up side is big. They could improve their reputation, please investors, help society and save the environment, besides make money.