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Institutional Investor Trustees Representing $635 Billion in Assets Launch Principles Addressing Sexual Harassment and Workplace Misconduct
[January 14, 2019]

Institutional Investor Trustees Representing $635 Billion in Assets Launch Principles Addressing Sexual Harassment and Workplace Misconduct

A coalition of trustees from several long-term institutional investors, with combined assets of more than $635 billion, has come together to create and promote the Trustees United Principles. These principles seek to ensure portfolio companies are working toward providing workplace cultures and environments that are safe, free of sexual harassment, violence and misconduct. The principles focus on human capital management strategies that attempt to mitigate and reduce future risks, which is a priority for the trustees and their respective institutions that invest with a focus on long-term value creation.

As fiduciaries, the trustees involved in this effort recognize that the recent wave of sexual harassment and misconduct incidents could leave companies open to significant operational, financial and reputational risks. If left unmonitored, these risks have the potential to do long-term damage to companies' bottom line and consequently to the pension funds' portfolios.

"Speaking on behalf of the trustees, we have a fiduciary obligation to our beneficiaries to take responsible actions to engage, monitor and mitigate human capital management risks," said California Public Employees' Retirement System Board President Priya Mathur. "This is a joint assertion that trustees and investors alike have a stake in engaging companies to promote policies that reduce incidents of sexual harassment, violence and misconduct and provide safe, supportive, and productive workplaces."

California State Teachers' Retirement System Board Vice Chair Sharon Hendricks added, "From my perspective, as a representative of the trustees for the world's largest educator pension fund, our concern goes beyond the immediate fall in company value. Less visible-but no less real-are the missed opportunities to create long-term value due to the adverse impact sexual harassment and misconduct have on corporate culture. The Trustee Principles were conceived as a catalyst for expanded engagement on an issue that remains largely invisible to investors."

Signatories currently include trustees from: CalPERS; CalSTRS; the Los Angeles City Employees' Retirement System; and, the Los Angeles County Employees' Retirement Association.

The trustees involved in this effort already focus on corporate governance engagement strategies, at their respective institutions, which address gender, racial and ethnic diversity issues across their institutions' portfolio companies, including: general staff, C-Suite leadership and the composition of their boards of directors. Like the institutions for which they are trustees, they see data transparency and disclosure of this issue as essential to support decisions on where and how to deploy their capital.

The Trustees United Principles are:

"Principle 1: Corporations must ensure a work environment free of sexual harassment and violence. Boards must support the right of employees, both individually and collectively, to safely bring forward claims of sexual harassment and violence. Company directors should publicly share due diligence processes used to respond to sexual harassment and violence complaints filed by all employees, including contingent, temporary, and subcontracted workers.

"Principle 2: The use of non-disclosure agreements and forced arbitration policies reinforce the silence that perpetuates harassment. Transparency in reporting sexual harassment and misconduct settlemen costs to investors can help change corporate culture and limit the potential for significant exposure to financial and reputational risk.

"Principle 3: Companies must prioritize diversity at all levels, including the board of directors and C-Suite, to take advantage of the opportunities diversity affords and to be more attuned to the risks associated with harassment, misconduct and discrimination. Diverse boards which reflect the racial and gender composition of a company's workforce can help to create organizational cultures that prevent sexual harassment and related risks from materializing.

"Principle 4: Policies and agreements, such as collective bargaining agreements and responsible contractor policies, that protect workers' rights provide mechanisms for risk mitigation by addressing power imbalances that often facilitate abuse, harassment and discrimination and by providing clear mechanisms for redress when incidents occur."

The Trustees Principles complement board-approved principles and policies at each signatory's organization, respectively: CalPERS Governance and Sustainability Principles; CalSTRS Corporate Governance Principles; LACERA Investment Policy; and LACERS Investment Policy.

Trustees, institutional investors and asset owners that share a similar risk viewpoint surrounding human capital management concepts, including mitigating risks of sexual harassment and workplace misconduct, are invited to visit for more information on submitting their interest to become a signatory and demonstrate their support for these principles.

About CalPERS: For more than eight decades, CalPERS has built retirement and health security for state, school, and public agency members who invest their lifework in public service. Our pension fund serves more than 1.9 million members in the CalPERS retirement system and administers benefits for more than 1.4 million members and their families in our health program, making us the largest defined-benefit public pension in the U.S. As of October 31, 2018, CalPERS' total fund market value stood at approximately $345.6 billion.

About CalSTRS: The California State Teachers' Retirement System, with a portfolio valued at $219.4 billion as of November 30, 2018, is the largest educator-only pension fund in the world. CalSTRS serves California's more than 949,000 public school educators and their families from the state's 1,700 school districts, county offices of education and community college districts. A hybrid retirement system, CalSTRS administers a combined traditional defined benefit, cash balance and voluntary defined contribution plan. CalSTRS also provides disability and survivor benefits.

About the Los Angeles City Employees' Retirement System: LACERS, established by City Charter in 1937, to provide retirement benefits to the civilian employees of the City of Los Angeles, representing three-fifths of the City's workforce. Currently LACERS provides services to 24,000 active employees, and provides benefits to nearly 17,500 retirees and their beneficiaries. LACERS administers the benefits approved by the City (the plan sponsor) which includes pension benefits, administration of retiree health care premiums, and management of the pension fund portfolio to offset payment of these obligations. As of November 27, 2018, the LACERS investment fund was worth approximately $16.8 billion.

About the Los Angeles County Employees' Retirement Association: Per the County Employees Retirement Law of 1937, LACERA is the administrator of defined retirement plan benefits for the employees of Los Angeles County and outside Districts. LACERA's services begin the moment a new hire becomes a member and continue throughout the member's career and retirement. As a forward-thinking association, LACERA is constantly integrating new technologies into business procedures and enhancing the scope and quality of services offered to more than 165,000 members, including close to 62,000 benefit recipients. As of November 30, 2018, the LACERA investment fund was worth approximately $52 billion.

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