California Public Employees' Pension System (CaIPERS), the largest public pension fund in the United States have adopted new principles approach to investing in emerging stock market in November 2007. Earlier CalPERS internal and external money managers were forbidden to invest in some developing countries, as these countries do not meet certain standards for political stability, human rights, market regulation, etc.
New principles of the approach will allow managers to CalPERS money to invest in companies that are financially attractive and competitive positioning, provided that their business practices have been the sound of the environmental, social and governance (ESG) in terms of where they were located. Allowing investment in these types of companies, regardless of where they work, CalPERS was hoping to improve their return on investment. The case is set in January 2009, just over a year since the principles of the approach taken. This is a good time to review the implementation of the process and how the new principles of the approach changed CaIPERS "emerging market stock portfolios and their returns. It focuses on one of the external managers of CalPERS" Fund Advisors fund sizes and services for DFA and CalPERS, KLD Research and analysts. One of the issues before the CalPERS with this new approach is to invest in PetroChina, which was closed because of a previous selection criteria that were used to determine which countries qualified for emerging markets investments. The case also raises the question about the difference between "value" and "values" of investment and future importance of ESG investing. "Hide
by Robert G. Eccles, Aldo Sesia Source: Harvard Business School 40 pages. Publication Date: Mar 08, 2009. Prod. #: 409054-PDF-ENG
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