CalPERS ‘on track’ with £100bn climate commitments, CIO says
CalPERS CIO Stephen Gilmore has confirmed the fund is on track to meet its commitment to deploy $100bn in climate investments by 2030, as the largest US public pension fund disclosed double-digit returns driven by strong private market and equity performance
CalPERS reported an investment return of 14.8% for the past fiscal year, largely driven by robust returns on equities and private market holdings. Private equity alone delivered a net return of 24.1% over the past year.
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In 2023, CalPERS pledged to commit $100bn to climate investments whilst aiming to halve its carbon footprint by the end of the decade. Speaking from the fund’s annual offsite meeting, CIO Stephen Gilmore told Net Zero Investor that some $60bn had been deployed so far and that the fund remained on track to meet its targets.
Among other initiatives, CalPERS has committed $5.8bn of its portfolio to its customised public equity Climate Transition Index strategy. In private markets, CalPERS has invested in vehicles including TPG Rise Climate (private equity and infrastructure funds), West Street Climate Credit (Del) LP, Generation IM Sustainable Private Equity Fund II (A), B Capital Climate Fund I, LP, Copenhagen Infrastructure Partners V USD Feeder SCSp, Brookfield Global Transition Fund II-B, LP, and others.
Private equity transparency push
Speaking at the fund’s annual offsite meeting, CEO Marcie Frost attributed the strong performance largely to a change in how the fund approaches private equity. “Shifting our focus from traditional buyout funds to venture growth and mid-market funds, and making more co-investments in private markets, gives us the potential for higher returns, truly driving growth and job creation in California, the nation and the world,” she said.
However, she also cautioned against moves to increase disclosure levels for private market allocations. “This year, our discipline has been put to the test; we had to push back against efforts to put politics over pensions.”
Her warnings were directed at Senate Bill 1319, the Private Equity Sunshine Act proposed by Democratic Senator Dave Cortese, which would have required Californian pension funds to disclose greater details on fees and asset performance.
“We will always stand strong for transparency, but we will resist efforts like Senate Bill 1319, which would have seriously affected our ability to invest in private markets and would have led to billions of dollars in increased costs for employers and members,” Frost stressed.
Total Portfolio Approach
CalPERS’ latest performance data arrives as the fund embarks on a shift towards a Total Portfolio Approach (TPA), replacing its traditional Strategic Asset Allocation (SAA) model.
While the shift could potentially facilitate greater flexibility to invest in private markets, Gilmore said it would not have a direct impact on climate allocations. “You should think about that climate strategy, sustainable investment strategy, as being integrated within the total portfolio approach. So you shouldn’t really see much of a change there. All the investments we make in those areas should justify a place in the portfolio,” he said.
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