CalSTRS partners with Nuveen for $2bn infrastructure credit investment

For over 25 years, Don Dimitrievich has operated at the intersection of energy, power and credit markets. A chemical engineer with legal training, Dimitrievich is a portfolio manager for Nuveen’s energy infrastructure credit strategy.

Last year, the strategy attracted $1.3bn in capital commitments at first close. Japanese and Korean pension funds – both corporate and public – backed the strategy. As did insurers, asset managers and a Canadian pension fund anchor investor.

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Now California’s State Teachers’ Retirement System (CalSTRS) is set to deploy $2bn in partnership with the strategy Dimitrievich runs. The investment partnership will focus on sustainable infrastructure while connecting with underlying themes of energy security and artificial intelligence.

Investment focus

At the heart of the Nuveen – CalSTRS partnership is a sustainable infrastructure portfolio that sits within the broader strategy. CalSTRS will enter as anchor investor for the portfolio.

The investment universe, according to a statement from Nuveen, will encompass renewable energy generation, storage, energy efficiency, industrial decarbonisation and circular economy.

“The demand for new energy, power, and digital infrastructure has never been greater”, says Dimitrievich. Viewed together, he reckons onshoring manufacturing operations, broad-based electrification and demand for AI will create a ‘generational need’ for a significant infrastructure buildout.

“We believe private credit is uniquely positioned to play a leading role in financing that buildout while also achieving positive sustainable outcomes”, he adds.

For CalSTRS, Nuveen’s expertise in the asset class is part of the appeal. “We believe sustainable infrastructure credit requires specialists’ expertise to originate, underwrite and structure bespoke capital solutions”, says CalSTRS investment director Nick Abel.

Additionally, the strategy references two key investment undertones. First, artificial intelligence and digital infrastructure. Nuveen’s statement frames this as a key driver of growth in US and OECD countries. Surging power demand from AI, for example, is a tailwind the strategy is seeking to tap into.

Second, energy security both in the US and abroad. Lately, The Trump administration has cited energy security as a reason to seek to terminate wind energy leases and redirect capital into alternative sources such as nuclear energy and natural gas.

Nuveen’s infrastructure credit strategy has recently invested in wind energy. Earlier this month, the asset manager announced a $546m preferred equity investment in SunZia – a 3650MW wind project that delvers more power than the Hoover Dam at full capacity.

Net zero CalSTRS

For CalSTRS, Abel says the investment is in the best interests of its members. “This investment with Nuveen EIC aligns with our long-term outlook and mission to provide a secure retirement for our members”, he notes.

Part of that long term outlook for its $417.3bn investment portfolio, is a goal to reduce portfolio emissions intensity by 50% before the end of the decade. A long-running climate solutions investing programme backs up the plan.

Since 2021, when the investment committee approved a dedicated private markets sustainable investing portfolio, over $5.5bn has been deployed into ‘low carbon’ solutions.

“Sustainable infrastructure credit also represents an important allocation for CalSTRS as we seek to generate strong risk-adjusted returns and contribute to a cleaner, more resilient, and affordable clean-energy economy”, Abel adds.

CalSTRS’ net zero by 2050 (or sooner) target shapes allocation even beyond private markets. Some 20% of its public equity holdings are in a low-carbon index – courtesy of a 2022 investment committee approval. In real estate too, the fund has targeted exposure to properties with LEED-certifications. In addition, its disclosures suggest the fund conducts evaluations of external manager alignment with CalSTRS net zero goals.

For the Californian pension investor, the Nuveen partnership marks a steady continuation of its climate capital allocation plans, despite the headwinds from Washington DC.

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