Over the summer, Colorado PERA released its 2019 Investment Stewardship Report, which demonstrates how PERA’s commitment to cost-conscious investment strategies and investment decisions that consider a range of factors preserves the value of contributions to the plan for the longterm and protects the plan’s financial sustainability for generations to come.
Given its size and reputation, PERA knows it can have a meaningful impact in creating financial markets that are designed for the benefit of all investors. PERA’s advocacy is rooted in three principles:
- Fairness – markets should treat all investors in a fair and equitable manner.
- Alignment – company success in the long run depends on aligned interests of companies and investors.
- Disclosure – investors deserve robust, accurate information about financial and operational results of the firms in which they are owners and creditors.
Fair and equitable markets are in the best interest of PERA members. Staff and PERA Board members participate in advisory and advocacy groups in order to develop, share, and promote best practices for improving global capital markets for all investors. In fact, PERA holds seats on 223 different advisory boards to promote ethical and professional practices in the industry and on the majority of its private investment funds.
PERA Executive Director Ron Baker serves on the Board of Directors of the Council of Institutional Investors (CII) and, in 2018, PERA collaborated to create and co-sign letters regarding shareholder rights.
Other advisory groups in which PERA is involved, such as the Sustainable Accounting Standards Board (SASB), the Harvard Law School Institutional Investor Forum (HIIF), and the University of Colorado Burridge Center for Finance promote stronger investment practices and more efficient markets. SASB, for example, develops standardized metrics that help investors analyze a company’s ability to operate sustainably, which PERA believes will have considerable impact on how the investment industry thinks about the financially material aspects of sustainability in the future.
Ideally, company interests are aligned with investors’ interests through sound corporate governance. However, there is an-ever present temptation for management to act in ways that benefit themselves over their investors, harming the returns of their investments and impacting shareholder value. To keep companies’ interests aligned with those of PERA and other investors, staff directly engage with corporate management and look for partners with a track record of strong corporate governance.
Staff also review external managers, analyze management track records, and vote by proxy as the shareholder of investments made on behalf of PERA members and retirees.
As an institutional investor, PERA depends on accurate and timely information from companies in order to assess and project the overall performance of its investments. Yet, there are clear gaps in the availability and quality of financially material disclosures. This is why PERA supports developing and promoting transparent, accurate disclosures of companies’ operations and financial positions.
Calculating the financial impact of environmental sustainability is an example of intangible asset value that is hard to measure. That’s why PERA supports SASB’s efforts to develop standardized metrics to help investors analyze a company’s sustainability.
Advocating for strong corporate governance and fair, equitable markets is another critical component of PERA’s investment stewardship philosophy. More on PERA’s four-part stewardship approach is available here.