The California Public Employees’ Retirement System (CalPERS), one of the largest public pension funds in the U.S., announced the launch of its new Sustainable Investments 2030 Strategy, aimed at accelerating its transition to a net zero emissions portfolio, and including a new pledge to invest $100 billion in climate solutions by 2030.
The new strategy also outlines actions that would see CalPERS engage with portfolio companies on their net zero plans, and exit investments in companies that do not have a credible plan to reduce carbon emissions.
CalPERS Interim Chief Investment Officer Dan Bienvenue said:
“CalPERS is providing a tangible and measurable roadmap as we look to support companies, projects, and technologies that are playing a crucial role in promoting sustainable investing, reducing greenhouse gas emissions, and supporting the transition to a low-carbon economy. Our plan is expansive and addresses the need for climate solutions across every industry and not just fossil fuels.”
In a presentation to the investment committee of the Board of Administration, CalPERS outlined the primary objectives of the new sustainable investment plan, which included the generation of outperformance by investing in climate solutions and emerging and diverse managers, increasing portfolio resilience by fully integrating ESGEnvironmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. More analysis, including climate risk analysis, implementing a path to net zero through investments, engagement and advocacy, promoting greater inclusion and representation in the financial industry and broader economy, and promoting efficient and equitable financial markets through advocacy and regulatory action.
According to CalPERS, the new $100 billion climate solutions commitment would align its investments with its goal to reduce portfolio emissions intensity by 50% 2030, and support its ambition to balance carbon emissions from its investments with carbon reductions by 2050.
The climate solutions targeted by the fund fall under 3 broad categories, including Mitigation, or investments in areas that aim to enable GHG emissions reductions at scale, Adaptation, with investments that aim to reduce harm or to exploit opportunities from climate change effects, and Transition, with investments focused on hard-to-abate sectors – such as heavy industry or transport – with credible decarbonization plans.
Peter Cashion, CalPERS’ Managing Investment Director for Sustainable Investing, said:
“These investments, which we believe can be made across an array of asset classes, will be designed to generate excess returns and boost our earnings in service to the mission of meeting our members’ retirement dreams.”
Alongside the new 2030 investment goal, specific actions outlined in the strategy to support CalPERS pathway to net zero included engaging portfolio companies on their net zero plans, advocating for policy and regulation promoting decarbonization and expanding investment opportunities, developing a process to exit certain investments in companies without credible transition plans, integrating climate risks and opportunity assessment into investment decisions, and enhancing the measurement and reporting of portfolio emissions.
In addition to the climate-related commitments, the new strategy also included goals to promote greater inclusion and representation in the financial industry and global economy, with actions including surveying external managers to keep track of their diversity achievements increasing efforts on regulatory requirements and shareowner action, and a focus on human capital management, with plans to advocate for mandatory corporate reporting on human capital management, integrate human capital management data to support investment decision making, and promote labor principles that ensure the fair treatment of workers.
CalPERS CEO Marcie Frost said:
“Our 2030 strategy for sustainable investing is the next step in CalPERS’ efforts to improve our long-term investment returns while also making meaningful progress in the fight against climate change. In addition, we are continuing the important work of promoting inclusive corporate leadership and the rights of workers.”