Impact managers will need to align with one of its pre-set sustainability themes and satisfy the asset class team’s due diligence “seven P’s”, if they want to work with the $250 billion New York State Common Retirement Fund. Ahead of this week’s virtual Impact Investor Forum, New Private Markets quizzed Andrew Siwo, director of sustainable investments and climate solutions at the pension, about how it integrates impact and sustainability into its portfolio.
What place does impact have in your overall portfolio?
In June of 2019, New York State Comptroller Thomas DiNapoli, sole trustee of the New York State Common Retirement Fund, released a Climate Action Plan, which provides a roadmap for the Fund to address climate risks and opportunities across all asset classes. A key component of the plan is the creation of a formal Sustainable Investments and Climate Solutions portfolio, which I oversee, and an increase of the Fund’s total sustainable investment commitment to $20 billion. The CRF portfolio currently has over $11 billion in committed capital to sustainable investments, several of which are impact investments.
What sectors or geographies are your impact priorities?
SICS represents a tapestry of investments that are loosely tied to the UN Sustainable Development Goals. Across the globe, we target nine themes split equally into three categories: human rights and social inclusion (eg, health and wellbeing); climate and the environment (eg, pollution and waste management); and economic development (eg, affordable housing).
How do you work with GPs?
We rely on GPs that support our aim to maximise long-term returns at a prudent level of risk. Passive and actively managed funds play a role in the portfolio, while some investment assets we tend to manage internally. We have a particular focus on how managers integrate ESG into their investment selection process and is an expectation for all of our managers. We integrate ESG through the entire Fund since we feel that awareness of ESG risks and opportunities is an expectation of modern investment managers and fiduciaries. Four areas that we tend to explore regarding ESG integration are: transparency, information, process and engagement.
What do you look for in a manager?
Our evaluation process occurs at the fund level (investment strategy). The “seven P’s” tend to cover many relevant items in manager selection: people, philosophy, product, process, performance, precautions and perspective. As impact investments have become more mainstream and competition has risen, we expect that ideas that arrive at a positive outcome to both win the approval of a respective asset class team as well as advance a pre-set sustainability theme we target. Our collaborative process ensures rigorous and comprehensive analysis.
To what extent do you measure the non-financial impact of your investments?
In December of last year, we set a 2040 “net-zero” carbon emissions target. As a result, our view is that perceived “non-financial” factors can consequently have financial implications, such as the disclosure, physical, and transition risk associated with climate change. Since we have a long-term perspective, we cannot ignore such threats. We also work with strategic partners to identify and assess specific risks and, when necessary, exit investments believed to be value-destructive and not accretive to the fund.
Andrew Siwo is the director of sustainable investments and climate solutions at the New York State Common Retirement Fund. He is charged with providing leadership and oversight of sustainable investment efforts across the Fund’s $250 billion portfolio.
On Tuesday 25 May Siwo will appear alongside speakers from the California State Teachers’ Retirement System, APG, PGGM and BlueOrhcard to discuss the mainstreaming of impact into institutional investment at the Impact Investor Forum.