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Mike Frerichs
Treasurer | Illinois

The Sustainable Investing Act

Idea Category: Climate Change

Problem

Sustainable investing reverses the trend of focusing narrowly on financial results and instead takes a holistic view of investment. This is appropriate given the wide range of risks from climate change and other social factors that have and will continue to impact corporate performance. More than four-fifths of companies anticipate being impacted by climate change. Impacts will be felt across industries in a variety of ways, from logistics interruptions to increased operating costs to more limited resource availability and stranded assets. With a sustainable investment policy, public fund managers will not be caught between their responsibility to maximize investment returns and their responsibility to be good stewards of their communities.

Solution

Investment policy can align financial interests to address climate risks. By integrating relevant factors into decision-making, public fund managers minimize risk, maximize returns and meaningfully impact corporate, social and environmental outcomes. This Act codifies sustainable investing as a best practice. It enhances fund managers’ ability to fulfill their fiduciary duties by improving portfolio performance while benefiting our communities and the world by investing with regard for climate risks and social impacts. From our framework, public fund managers can develop tailored sustainable investment policies along with the specified factors for consideration, including climate and environmental risks, social impacts and firm governance.