Investor and company partnership is key to success.

• Author: Simpson, Anne

A company's board members, investors, and executives all have a common goal. They want to see the company they are vested in succeed in exceptional ways. From financial gain to the belief that their product or service is the best on the market, each stakeholder seeks longevity and growth for the company.

As a shareowner of more than 10,000 publically traded companies, the California Public Employees' Retirement System (CalPERS) has extensive experience working with boards and executives to help companies reach goals and reduce risk. And while we have a breadth of experience, we also realize that each company is unique. For this reason, we prefer to engage with the companies we invest in on a regular basis to offer assistance in areas that could be potential risks for the health of the company.

Acting as fiduciaries first and foremost, CalPERS' goal is to achieve long-term, sustainable, risk-adjusted returns for the fund. We have a long-standing commitment to sustainable investment, which means taking account of environmental, social, and governance (ESG) factors when we engage with companies.

Integrating ESG issues is a strategic priority across CalPERS' portfolio. Grounded In the three forms of economic capital heeded for long-term value creation--financial, human, and physical--we have developed three strategic themes: Alignment of Interest, Human Capital, and Climate Change. These themes set the framework for the fund's ESG work and our corporate engagement.

One important example of our ESG efforts is board diversity. A number of studies have shown that board diversity results in better financial performance. For example, a recent report, Diversity and Inclusion: Evidence on Corporate Performance, by Dr. Akosua Barthwell Evans of The Barthwell Group and Julia Dawson of Credit Suisse, demonstrated that globally, companies with one or more women on the board have seen

an excess share price of 3.4 percent over the past 11 years. In comparison, companies with male-only boards saw share prices lose 1.2 percent on average per year over the same period.

The report also found high risk associated with organizations that lacked diversity. These risks include missed market opportunities, such as engaging with millennials, and slower adaption to new technologies, including higher vulnerability to cybersecurity issues.

To assist boards in their effort to become more...