CalPERS reveals further details of its $100bn climate investment pledge

CalPERS, the $495.3bn pension plan for Californian public sector workers revealed further details on how it plans to execute it pledge to invest $100bn in climate assets

Putting anti-ESG headwinds aside, Sacramento-based pension fund wrapped up last year with a bold promise: by the end of the decade, it plans to invest $100bn in climate solutions which in turn would cut the portfolio’s carbon footprint in half.

The fund has now set out in greater detail how it intends to deliver on this promise. Among others, CalPERS plans to shift some $5bn in public equity investments towards a customised Climate Transition Index which aims to factor in risks and opportunities of the global energy transition.

In private markets, CalPERS has now confirmed 9 signed commitments of more than $1.1 billion in sectors supporting energy production and distribution as well as freight and supply chain optimisation. A further $3.6bn in private market investments are currently under review and are expected to be finalized in the coming weeks and months, the fund said.

Across the entire portfolio, CalPERS has invested nearly a third of its assets in private markets.

A key reason for the increased commitments to the energy transition is their potential for growth stressed CEO Marcie Frost. “As we continue to measure the portfolio risks posed by climate change, our long-term strategy must also include providing some of the capital needed to finance the decarbonisation of the global economy.”

“Few things present greater risk to the planet and to our bottom line than climate change. Our job is to turn these risks into opportunities by making new investments in the green economy” added Peter Cashion, managing investment director of the CalPERS Sustainable Investments Program.

CalPERS’ $100bn plan will focus on three main areas of investment, Cashion explained: “first we will invest in mitigation, these are strategies that reduce our greenhouse gasses renewable energy carbon capture and waste management.

We will also invest in adaptation, these are strategies designed to manage water supply, rethinking agriculture and prepare for natural disasters.

Finally, CalPERS will invest in transition assets these are strategies designed to incentivise high emitters to develop more climate friendly options” he added.

CalPERS’ climate pledge comes at a time of change for the pension fund which has recently appointed Stephen Gilmore as new chief investment officer. It is also taking a leading role in Climate Action 100+ with Michael Cohen, chief operating investment officer having been appointed as chair of the stewardship coalition.

Year to date, the fund has returned 7.8% with public equities and private debt so far acting as the biggest return drivers, according to the fund’s latest Trust Level Review.

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