Investment Stewardship FAQs

PERA’s investment stewardship philosophy is about serving as responsible stewards of plan assets for the ultimate benefit of PERA members, retirees, and their beneficiaries. Our stewardship goes beyond proxy voting and engagement to encompass other ways we serve as good stewards of the PERA portfolio. We do this by watching our investment costs, integrating financially relevant factors in our investment decisions, advocating for stronger markets, and evaluating our portfolios on an ongoing basis. In short, it’s how we stay true to our objective by pursuing the best risk-adjusted investment returns, while remaining authentic to our mission to provide retirement security for our members and ensuring the sustainability of the fund.

If you’re reading this, PERA’s Investment Stewardship Report may be for you! It’s our primary tool for communicating the ways we serve as good stewards of plan assets including:

• What PERA’s philosophy and approach is to financially sustainable investing
• How PERA protects members’ interests through the four key practices of our investment stewardship (Protect, Integrate, Advocate, and Evaluate)
• Why stewardship matters to investors and PERA’s unique perspective on industry themes

PERA’s fiduciary duty is a legal obligation to act solely in the best interests of plan participants and benefit recipients. When it comes to PERA’s investments, PERA must exercise prudence in making investment decisions with care, skill, and diligence, and make those decisions in the best financial interest of plan participants. It is a huge responsibility and one we take seriously. PERA’s investment decisions are firmly rooted in the fiduciary duty we owe our members. That means all of our investment stewardship initiatives prioritize our members’ retirement security by focusing on positive long-term financial outcomes.

The majority of PERA portfolios are constructed through fundamental financial analysis, which means PERA’s investment experts diligently evaluate factors that can present risks and opportunities for long-term financial success when determining which investments to make. Where environmental, social, and governance (ESG) factors are expected to impact the long-term financial performance of these investments, they are included in the overall mosaic of information considered when making an investment decision. That extends to PERA as proxy voting decisions, which also incorporate factors that are expected to influence the financial performance of the public companies in which we own stock. Whether we are actively selecting publicly-traded stocks and bonds, real estate, or private market funds for inclusion in the portfolio, PERA’s due diligence includes assessing financially material ESG factors specific to each active investment decision. For more information on how PERA integrates financially relevant factors in our investment decisions, please see the Integrate section of this year’s Investment Stewardship Report.

PERA invests fund assets in order to generate retirement income for our members in perpetuity. In order to meet those pension obligations, our investment objective is to pursue the best risk-adjusted returns to the Total Portfolio over a long time horizon. We will consider environmental, social, and governance factors when they are financially relevant to an active investment decision. At any given time, PERA may have investments in various companies, industries, or geographic regions that may come under scrutiny for personal, social, or political reasons. However, we must prioritize financial sustainability, over other types of sustainability, in our investment decisions.

Yes, as a PERA member, you have options to invest your own retirement savings in the CAPs in environmentally or socially sustainable investments. These options include:

• PERAdvantage SRI Fund. This fund is managed by investment professionals who select stocks and bonds for inclusion in the fund based on certain criteria that are designed to promote financial returns as well as invest in companies that have positive environmental or social sustainability qualities.
• Self-Directed Brokerage Account. This option allows participating members to invest their personal retirement contributions into publicly traded securities (e.g., stocks, bonds, and exchange traded funds) and mutual funds of their choosing through an individual brokerage account. Each participant assumes responsibility for selection of investments, and may include those which align with their own personal, social, or environmental values.

PERA conducts routine evaluations of its holdings and their contributions to the Total Fund’s risk and return performance through time. Additionally, we conduct periodic assessments of various ESG exposures underlying PERA portfolios. While ESG factor exposures do not drive our investment decisions, understanding these exposures can give us a different lens through which to view related risks and opportunities to which the portfolio may be exposed. Such evaluations help us to understand whether we are invested in companies that lead their peers in corporate governance, or whether our portfolios have lower carbon intensity than their benchmarks. For more information on how PERA uses independent data to evaluate these exposures, please see the Evaluate section of this year’s Investment Stewardship Report.

Proxy voting is a tool to align corporate management’s interests with the interests of shareholders. When an investor buys shares of stock in a public company, they are buying a piece of ownership in that company. And with that ownership comes the right and responsibility to vote on matters that can impact the company and its performance. Those matters can be put to ballot by the company’s board or its shareholders, and cover important company decisions like who will serve on the board of directors, whether or not a company merges with another company, and what kind of disclosures the company will make to shareholders. Shareholders can vote in person at a corporation’s annual general meeting (AGM), or cast their votes via an agent that votes according to the instructions submitted by the shareholder on their proxy ballot in advance of the AGM. This is called voting by proxy, or proxy voting.

PERA votes by proxy for shares held in public equity portfolios within the Defined Benefit (DB) and Capital Accumulation Plans (CAPs). For more information on the PERA Board of Trustees proxy voting philosophy and policies, please see the Board’s Proxy Voting Policy.

PERA believes that the right to vote on corporate matters as a large shareholder is, in itself, an asset of the plan to be managed under our fiduciary duty. Through proxy voting, we can encourage strong management oversight and profitable business practices, and advocate for disclosures that provide investors decision-useful information on how the company is managing ESG risks and opportunities that are financially material. It’s one of our primary tools to engage portfolio companies and integrate relevant factors into our decisions.

The primary goal of our advocacy and engagement is to promote best practices in capital markets, the investment industry, and at the companies in which we invest. We do this by contributing our expertise to a variety of industry organizations, regulatory and legislative reform, and through proxy voting and advisory board participation for companies in which we have an ownership stake. Over the past few years, PERA has publicly advocated for:

• Decision-useful disclosures of financially relevant ESG issues that can impact investors’ opportunities and risks
• Unbundling research and transaction costs in public equity markets so investors have improved fee transparency
• Proxy issues such as objective proxy advisory services and universal proxy cards so investors are empowered to maximize their ownership power
• Fortification of public company auditing oversight for stronger financial integrity

See the Advocate section of this year’s Investment Stewardship Report.