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GOVERNANCE AND SUSTAINABILITY AT TIAA-CREF
A Strategy for Long Term Investing
INTRODUCTION
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Shareholder Advocates for Largest Private Pension
System in U.S.
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Approximately $402 billion under management (as of
9/30/2009)
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3.4 million individual participants in the educational,
research and non-profit fields
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UNIVERSAL OWNERSHIP
•Universal owners invest in the entire market
•Characteristics:
• Long-term investment horizon
• Absolute returns, not just relative
• Emphasis on market returns over individual companies
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UNIVERSAL OWNERSHIP: IMPLICATIONS
•Responsibility to act as an owner of companies
•Anticipate, rather than react to problems
•Consider uncertainties and externalities Help to establish
market norms
•Insist upon transparency and accountability to shareowners
•Avoid micromanagement
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GOVERNANCE AT TIAA-CREF
•Vote Proxies
•Corporate Dialogue
•Thought leadership
•Establish relationship of trust through private, collegial
engagement
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SUSTAINABILITY- DEFINITION
•Meet current needs without compromising the ability to
meeting future needs
•Sustainability is important to long term company
performance and market returns
•Economic, social and environmental dimensions
•Requires breadth of vision
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SUSTAINABILITY – ROLE OF COMPANIES
•Integrate sustainability into business strategy
•Engage stakeholders from the outset
•Establish corporate priorities and policies
•Develop corporate-wide internal management systems
•Disclose strategy, goals, results
•Review results and adapt
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SUSTAINABILITY - ROLE OF SHAREHOLDERS
• Promote long term shareholder and stakeholder value
• Ensure accountability and transparency
• Provide independent, credible perspective
• Serve as early warning system
• Help craft solutions
• Focus on market-wide impacts
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CLIMATE CHANGE – RISK AND OPPORTUNITY
•Regulatory (Taxes, regulation, lack of global standards)
•Market (consumer preference)
•Operational (need for adaptation)
•Reputation (risk or opportunity)
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CLIMATE CHANGE – TIAA-CREF RESPONSE
•Risks and opportunities: Real Estate, Equities, Corporate
Brand
•Efficiency goal of 10% improvement over two years
•Seeking investments in emissions reduction technology
•Workforce housing investments
•Climate risk initiative
•Investor memberships
•Carbon Disclosure Project report
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APPENDIX
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TWELVE QUESTIONS ON CORPORATE CLIMATE
CHANGE REPORTING (TIAA-CREF)
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Does the company publicly disclose its greenhouse gas (GHG) emissions on both an absolute and intensity basis? Is this
analysis performed according to commonly accepted methodologies?
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Does the disclosure include all of the direct, indirect, and/or other GHG emissions that might be material for the company?[1]
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Does the report allow comparisons to past years? Does the company provide forecasts of future GHG emissions?
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Has the company analyzed all potential risks and opportunities on a company wide basis related to global warming, including
regulatory changes, physical risks, and impact on the company’s market?
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Does the company’s business strategy anticipate the impact of the potential regulation of carbon emissions?
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Does the company have a strategy for adapting to any physical risks of climate change?
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Does the company’s strategy anticipate risks or opportunities related to the impacts of global warming on competitive
positioning, including the value of company intellectual property?
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Does the company have long term goals and targets to measure the success of its GHG strategy? Does the company factor a
cost of carbon into investment decisions?
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Does the company have adequate governance structures to provide oversight for its GHG strategy? Are there management
systems in place that provide incentives for meeting these targets?
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Are the company’s public policy positions disclosed? Is it clear how they are consistent with the firm’s overall strategy around
GHGs?
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Does the company explain why it has chosen not to include any of the above?
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Are we convinced?
[
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SUSTAINABILITY - POSSIBLE CORPORATE
RESPONSES
Zadek’s Five Stages of Corporate Responsibility
Stage 1: Defensive. “Its not our job to fix that.”
Stage 2: Compliant. “We’ll do just as much as we have to.”
Stage 3: Managerial. “It’s the business, stupid.”
Stage 4: Strategic. “It gives us a competitive edge.”
Stage 5: Civil. “We need to make sure everyone does it.”
Source: Zadek, Simon. “The Path to Corporate Responsibility,” Harvard Business Review, December 2004, pp. 1–12
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STAGES OF SUSTAINABILITY GOVERNANCE
Stage 1: Viewing Compliance as an Opportunity
Examples: Using Compliance to induce the company and its partners to experiment with sustainable technologies, materials and processes.
Stage 2: Making Value Chains Sustainable
Developing sustainable sources of raw materials and components; increasing the use of clean energy sources such as wind and
solar power; finding innovative uses for returned products
Stage 3: Designing Sustainable Products and Services
Applying techniques such as biomimicry in product development; developing compact and eco-friendly packaging
Stage 4: Developing New Business Models
Developing new delivery technologies that change value-chain relationships in significant ways; Creating monetization models
Source: Ram Nidumou, C.K. Prahalad and M.R. Rangaswami, “Why Sustainability is Now the Key Driver of Innovation”, Harvard Business
Review, September 2009
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RESOURCES
Boston College Center For Corporate Citizenship
www.bcccc.net
Carbon Disclosure Project
www.cdproject.org
CERES Coalition
www.ceres.org
Global Reporting Initiative
www.globalreporting.org
TIAA-CREF Environmental Statement
http://www.tiaa-cref.org/support/news/articles/gen0911_193.html
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