Overview

ESG Update
At the direction of the Executive Director, the SBI Staff have fully implemented investment restrictions that remove as authorized investments publicly traded securities of any company deriving 25% or more of its revenue from thermal coal production, in accordance with the Board’s May 29, 2020 resolution.

As of December 31, 2020, the Combined Pension Funds, Non-Retirement program, and State Cash Accounts no longer hold these securities. Staff provided the SBI’s external investment managers with a list of restricted investments, which Staff will update on an annual basis.

As a committed member of the United Nations backed Principles for Responsible Investment (PRI), in 2021 the SBI will begin annual reporting on the SBI’s progress towards evaluating and confronting sustainability related investment risk. During the reporting process the SBI will compile various data on activities related to ESG risk activities, including various ESG related policies and procedures.

Overview

March 10, 2021 Meeting

Recent Commitments

• December 2020 - Harrison Street Real Estate Partners Fund VIII, LP - $150M (Real Estate)

• December 2020 – HS-OR Life Science Partners - $200M (Real Estate)

• December 2020 - Brookfield Infrastructure Co-Investment Side-Car LP - $50M (Real Asset)

• December 2020 – ClearVue OPERF - $50M (Private Equity)

• January 2021 – Hellman & Friedman Capital Partners - $350M (Private Equity)

• January 2021 – Luminate Capital Partners III, LP - $150M (Private Equity)

• January 2021 – Roark Capital Partners VI, LP - $250M (Private Equity)

2020 Real Estate Review

• 10 RE commitments totaling $1.8B

• Developed and implemented initial phase of ESG/DEI framework for investment due diligence

• Given the remote working status brought on by the global pandemic, further research into diversifying the portfolio via international core real estate exposures will be deferred to 2022

2021 Real Estate Pacing Plan

• $600-$800M in new commitments

• 3-5 commitments of $100-$350M

• Focus on diversifying strategies and creation of high-quality core properties with sustained long-term rental growth

• Continue integration of ESG factors into diligence and monitoring process

2020 Real Assets Portfolio Review

• 9 commitments totaling $1.6B

• Approval for 3 co-investment side-car commitments

• Progress in monitoring, risk management, and ESG efforts

2021 Real Assets Portfolio Priorities

• $1.5-$2B in aggregate commitments

• 5-10 commitments with an average commitment size of $150-$250M

• Targeting Q3/Q4 consultant recommendation – Aksia/TorreyCove agreement ends December 31, 2021

• Further formalize ESG and D&I integration across the broader Alternatives Program

2020 Diversifying Strategies Portfolio Review

• Albourne selected as Diversifying Strategies consultant

• Progress in monitoring, risk management, and ESG efforts

2021 Diversifying Strategies Portfolio Priorities

• Progress towards formalizing DSP 3.0 vision and plan with the recent selection of Albourne as consultant

• Further formalize ESG and D&I integration across the broader Alternatives Program

Overview

February 24, 2021 Meeting

Staff Changes

Michael Bailey – Left PRIM

Michael McGirr – Promoted to Director of Private Equity to replace Michael Bailey

Shannon Ericson – New hire joining the Risk team as a Senior Investment Officer

 Recent Commitments

• Berskshire Multifamily Debt Fund III - $150M (Real Estate)
• JMI Equity Fund X, LP - $100M (Private Equity)
• Thomas H. Lee Equity Fund IX, LP - $200M (Private Equity)

Overview

February 16, 2021 Meeting

ESG Update

The Board was provided with a memorandum, a recommended Iran and Sudan restricted list and an Iran and Sudan Divestment Impact Analysis of all companies on the January 1, 2021 MSCI ESG Iran-Sudan Focus List, performed by Meketa. The memorandum provided staff’s recommendation of approval of the Iran and Sudan Restricted List and the removal of ONGC Videsh Vankorneft from the Iran and Sudan Restricted List, as it no longer meets the divestment requirements of State Personnel and Pensions Art., Section 21-123.1 as the company is no longer a wholly owned subsidiary of ONGC Videsh Limited, a company that has involvement in oil activities in Sudan.

Overview

March 11, 2021 Meeting

 Target Allocation Changes

• S. Equity (14.5% to 11.5%)
• Non-U.S. Equity (7.0% to 5.0%)
• Emerging Markets (7.0% to 6.0%)
• Cash (0.0% to 2.0%)
• Strategic Credit (12.0% to 9.0%)
• Direct Lending (11.0% to 16.0%)
• REITs (3.0% to 2.0%)
• Private Equity (20.0% to 25.0%)
• Hedge Funds (8.0% to 6.0%)

Overview

February 24, 2021 Meeting

Recent Commitments

• Shamrock Capital Growth Fund V, LP - $30M (Private Equity)

March 2021

Allocation Changes

Private Growth

• Consolidate Opportunistic Private Credit and Private Equity allocations (12.5%)

Income

• Eliminate REIT (1%) and MLP (1%) allocations
• Add allocation to CLOs (2%)

Inflation Protection Bucket

• Eliminate TIPS (2%) allocation
• Increase allocations to Core Real Estate (3.6% to 4%) and Private Real Assets (ex-Real Estate) (2.4% to 4%)