Making Responsible Choices. Investing means making choices. For the decision-makers at the Illinois State Treasurer’s Office, it means choosing investments that are low risk, high-performing, and responsible. It means making investments that not only strengthen the economic well-being of Illinois citizens and institutions, but making investments that reflect our commitment to inclusion, sustainability, and sound corporate governance.
ESG Factors. We at the Treasurer’s Office know that to fulfill our fiduciary duty and maximize returns, we need to focus on more than just short-term gains and traditional indicators. Additional risk and value-added factors need to be integrated into the decision-making process to enhance the long-term value of our investments. These include environmental, social, and governance (ESG) factors.
Research agrees. Studies clearly demonstrate that companies with responsible ESG policies are lower risk investments and frequently provide collateral benefits to investors.1,2,3,4 So not only is ESG investing good for the community, it’s good for business. To put it another way, ESG investing aligns with our core fiduciary responsibilities.
That’s why we at the Treasurer’s Office are raising the bar. We endeavor to take governmental investment standards to a new level, one that recognizes that sound environmental, social and governance policies are strongly related to safer, more innovative, better-performing companies.
Why it matters. As a large, long-term investor to funds and corporations around the nation, we believe we can help raise the bar for the entire industry. That's why we're promoting an investment philosophy that fuses traditional investment objectives – safety of principal, optimal returns, and diversification – with a focus on corporate accountability, innovation, and the common good. By doing so, not only do we position ourselves to protect shareholder value and maximize returns, we can help foster a business culture that is more attentive to human rights, environmental impacts, and the needs of the entire community. And that benefits all of us in Illinois and beyond.
1Fulton, Mark, Bruce Kahn, and Camilla Sharples. “Sustainable Investing: Establishing Long-Term Value and Performance.” Deutsche Bank Group. June 2012. Accessible at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2222740&rec=1&srcabs=2508281&alg=1&pos=2.
2Verheyden, Tim, Robert G. Eccles, and Andreas Feiner. "ESG for all? The Impact of ESG Screening on Return, Risk, and Diversification." Journal of Applied Corporate Finance, vol. 28, no. 2, 2016., pp. 47-55.
3Kotsantonis, Sakis, Chris Pinney, and George Serafeim. "ESG Integration in Investment Management: Myths and Realities." Journal of Applied Corporate Finance, vol. 28, no. 2, 2016., pp. 10-16.
4Eccles, Robert G., Ioannis Ioannou, and George Serafeim. "The Impact of Corporate Sustainability on Organizational Processes and Performance." Management Science, vol. 60, no. 11, 2014, pp. 2835-2857.