Investment Policy: The investment policies of all Illinois public funds must contain language addressing the consideration of sustainability factors in the investment process. Funds are given the flexibility to adopt or modify language so that it best reflects the specific needs of the fund and is balanced with other important considerations such as investment risk, asset allocation, and management fees. This can be accomplished by adding a couple of sentences or by inserting a new section in the policy.
One example is that found in the Investment Policy Statement of the Chicago Teachers’Pension Fund (CTPF), updated November, 2019:
D. Sustainability Goals
The CTPF Board and Staff shall consider the prudent integration of sustainability factors into its investment decision-making, investment analysis, portfolio construction, due diligence and investment ownership in the execution of CTPF’s investment goals to fulfill its fiduciary duty, to maximize anticipated financial returns and to minimize projected risk.
Sustainability analysis will include additional reviews of investment accounts, funds or Portfolio Company’s performance on material factors likely to impact its long-term value. The analysis will also consider other relevant factors such as financial, legal and regulatory risks that contribute to an optimal risk management framework and are necessary to create long-term investment value.
Funds were expected to have made any necessary changes to their investment policies by January 1, 2020, the effective date of the Act. For those that have not yet made those changes, boards should take steps to do so as they meet throughout 2020.
Updated investment policies are required to be filed with the Department of Insurance within 30 days after their approval.
Investment Managers: The Act does not prescribe how funds should implement sustainable investing since the circumstances and investment goals of each fund are unique. The Act provides funds the discretion to pursue sustainable investing how they see fit consistent with serving the best interests of the fund’s beneficiaries.
One option is to have conversations with investment managers to determine how they are considering sustainability factors in their investment processes consistent with the sustainable investing language in the investment policy statement. The State Treasurer’s Office has observed that several funds have reported having fruitful conversations with managers about sustainable investing. The Office underscores the importance of documentation of these conversations or other actions in order to demonstrate compliance with the policy.