CalPERS' Emerging Equity in the Markets Principle

Posted: 22 May 2009

See all articles by Robert G. Eccles

Robert G. Eccles

University of Oxford - Said Business School

Aldo Sesia

Harvard Business School

Date Written: March 8, 2009


The California Public Employees' Retirement System (CaIPERS)-the largest public pension fund in the U.S.-had adopted a new principles-based approach to investing in emerging market equities in November 2007. Previously, CalPERS internal and external money managers were prohibited from investing in certain developing countries because the countries failed to meet certain standards for political stability, human rights, market regulation, etc. The new principles-based approach would allow CalPERS money managers to invest in companies that were financially attractive and competitively positioned provided their business practices were sound from an environmental, social, & governance (ESG) perspective regardless of where they were located. By allowing investment in these types of companies regardless of where they operated, CalPERS had hoped to improve its investment returns. The case is set in January 2009, a little more than a year from the time the principles-based approach had been adopted. It is a good time to review the implementation process and how the new principles-based approach changed CaIPERS' emerging market equities portfolios and their returns. The case focuses on one of CalPERS' external fund managers, Dimensional Fund Advisors, and a service provider to DFA and CalPERS, KLD Research & Analytics. One question facing CalPERS with this new approach is whether to invest in PetroChina, which had been off-limits previously due to the screening criteria that were used to identify which countries qualified for emerging markets investments. The case also raises the issue of the difference between "value" and "values" investing and the future importance of ESG investing.

Suggested Citation

Eccles, Robert G. and Sesia, Aldo, CalPERS' Emerging Equity in the Markets Principle (March 8, 2009). HBS Case No. 409-054; Harvard Business School Organizational Behavior Unit. Available at SSRN:

Robert G. Eccles (Contact Author)

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

Aldo Sesia

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States
617-496-2085 (Phone)

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