The Pension Fund Coalition for Inclusive Capitalism

Making Capital Work for the Long-term

The Pension Fund Coalition for Inclusive Capitalism, an initiative of the Coalition for Inclusive Capitalism and the Ira M. Millstein Center for Global Markets and Corporate Ownership at Columbia Law School, convened some of the world’s largest pension fund managers, as well as legal and other advisors, in an effort to empower pension fund managers committed to investing in sustainable businesses by directing their asset managers to invest in line with their long-term priorities.  

As a diverse set of asset owners focused on the long-term, public pension funds hold powerful levers for global change. Across markets and portfolios, they invest more than $23 trillion globally for the long-term interests of retirees.  Yet, many pension funds lack legal tools to direct how—or whether— their asset managers consider environmental, social, and governance (ESG) criteria.

To address this gap, the Pension Fund Coalition for Inclusive Capitalism developed model contract language establishing minimum ESG guidelines for use in investment agreements, with asset managers as well as private equity side letters and LP agreements. Flexible across a range of scenarios, approaches and public or private markets, the model language offers portfolio and legal teams new ESG tools for:

MODEL MANDATES

  • Individualized approaches
  • Standardized approaches
  • Criteria-based approaches
  • ESG-related commitments

VOTING RIGHTS

  • Proxy language
  • Investor rights
  • Manager guidelines
  • Record disclosure

REPORTING REQUIREMENTS

  • Regular requirements
  • Interim updates
  • Diligence and research
  • Adverse developments

ESG FACTORS AND CRITERIA

  • ESG factors
  • Sample language
  • Engagement guidelines
  • Investment restrictions

Model Investment Language

ESG Investor Resources

The following external resources for asset owners in asset manager relationships complement the ESG model contract language and may provide additional background for portfolio and legal teams.

ESG Toolkit for Pension Chairs & Trustees

Pension schemes resources identifying practical steps to embedding ESG considerations into investment decisions 

Institutional Investment Mandates for Long-Term Performance

Research collaboration on institutional investment mandates as anchors for long-term performance

ESG Disclosure Standards for Investment Products

Industry-wide consultation of voluntary global ESG disclosure standards for investment products

Private Equity ESG Roadmap & Resources

ESG roadmap and resources for LPs within the private equity industry

ESG Data Convergence Project

Private equity industry collaboration to standardize ESG metrics and reporting

ICGN Model Mandate Initiative

Model contract terms to align interests between asset owners and fund managers

SDG-related Corporate Reporting Metrics

Sector-specific SDG-related corporate reporting metrics for sustainable development

Co-Chairs and Conveners

SWN_4334_cropped2

Hiro Mizuno

UN Special Envoy on Innovative Finance and former Chief Investment Officer, Japan Government Pension Investment Fund
“Most public pension funds, have little control over how – or whether – their assets are invested with ESG guidelines. The model language addresses this gap by ensuring long-term value creation standards are upheld.”
20164719

Theresa Whitmarsh

Co-Chair, Ira M. Millstein Center for Global Markets and Corporate Ownership at Columbia Law School; Chair, FCLTGlobal; and former CEO, Washington State Investment Board
"With these tools, pension funds will have more ways to ensure that their capital is being deployed by asset managers in strategies that fit with a preferred approach to sustainability and ESG integration."
LdeR Headshot FINAL

Lynn Forester de Rothschild

Founder, Coalition for Inclusive Capitalism and Founding and Managing Partner, Inclusive Capital Partners
“The most powerful lever of investment change lies with asset owners, who can steer investment toward sustainable business and continue to provide value for their beneficiaries.”
Photo - Millstein, James

Jim Millstein

Co-Chair, Guggenheim Securities and Advisory Board Member, Ira M. Millstein Center for Global Markets and Corporate Ownership at Columbia Law School

Participants

The model language reflects the work of Pension Fund Coalition for Inclusive Capitalism partners, the Coalition for Inclusive Capitalism and Ira M. Millstein Center for Global Markets and Corporate Ownership at Columbia Law School, which benefited from the collaboration of representatives from various pension funds and organizations, including:
Pension Funds and Fiduciaries

British Columbia Investment Management Corporation (BCI)
Office of the Illinois State Comptroller
Public Sector Pension Investment Board
Stichting Pensioenfonds Zorg en Welzijn (PGGM)
University of California Investments
Washington State Investment Board

Organizations

Accounting for Sustainability
CFA Institute
Global Investors for Sustainable Development Alliance
FCLTGlobal
International Corporate Governance Network (ICGN)
Institutional Limited Partners Association (ILPA)

Partners