The California Public Employees’ Retirement System (CalPERS), one of the largest public pension funds in the US, has announced the launch of its new Sustainable Investments 2030 Strategy, aimed at accelerating the transition to a net-zero emissions portfolio, and with a new pledge to invest $100 billion in climate solutions by 2030.
The new strategy also outlines actions that will ensure CalPERS engages with portfolio companies about their net-zero plans and halts investments in companies that do not have a credible plan to reduce carbon emissions.
CalPERS Interim Chief Investment Officer Dan Bienvenue said:
“CalPERS provides a tangible and measurable roadmap as we look to support companies, projects and technologies that play a critical role in advancing sustainable investing, reducing greenhouse gas emissions and supporting the transition to a low-carbon economy. Our plan is comprehensive and addresses the need for climate solutions for every sector and not just fossil fuels.”
In a presentation to the Board’s Investment Committee, CalPERS outlined key objectives of the new sustainable investment plan, including generating outperformance by investing in climate solutions and emerging and diverse managers, and increasing portfolio resilience through ESG analysis to be fully integrated. , including climate risk analysis, implementing a path to net zero through investment, engagement and advocacy, promoting greater inclusion and representation in the financial sector and the broader economy, and promoting efficient and equitable financial markets through advocacy and regulation.
According to CalPERS, the new $100 billion commitment to climate solutions would align its investments with its goal to reduce the emissions intensity of its portfolio by 50% by 2030, and support its ambition to reduce carbon emissions from its investments in balance with carbon reductions by 2050.
The climate solutions the fund focuses on fall under three broad categories, including mitigation, or investments in areas that aim to reduce greenhouse gas emissions on a large scale; adaptation, with investments aimed at reducing damage or seize opportunities from the impacts of climate change, and transition, with investments focused on sectors that are difficult to tackle – such as heavy industry or transport – with credible plans for a low-carbon economy.
Peter Cashion, CalPERS Managing Investment Director for Sustainable Investing, said:
“These investments, which we believe can be made across a range of asset classes, will be intended to generate additional returns and grow our income in service of the mission of realizing our members’ retirement dreams.”
In addition to the new 2030 investment target, specific actions outlined in the strategy to support CalPERS’ path to net zero include engaging portfolio companies in their net zero plans, advocating for policies and regulations that promote decarbonization and expanding investment opportunities, developing a process for certain investments in companies without credible transition plans, integrating climate risks and opportunity assessments into investment decisions, and improving the measurement and reporting of portfolio emissions.
In addition to the climate-related commitments, the new strategy also included goals to promote greater inclusivity and representation in the financial sector and the global economy, with actions such as surveying third-party managers to track their diversity performance, boosting efforts in regulatory requirements and shareholder action were increased. 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 fair treatment of employees.
CalPERS CEO Marcie Frost said:
“Our 2030 Sustainable Investing Strategy is the next step in CalPERS’ efforts to improve our long-term investment returns while making meaningful progress in the fight against climate change. In addition, we continue the important work of promoting inclusive business leadership and workers’ rights.”