CalPERS Pledges to Boost Low-Carbon Assets to $100B

The California Public Employees’ Retirement System announced it will commit $100 billion in assets to a new sustainable investing strategy aimed at accelerating its portfolio’s progress toward reaching net-zero carbon emissions. The pledge would more than double the nearly $47 billion in low-carbon assets the pension fund currently holds.

Under the new strategy, the $462 billion pension fund aims to cut the carbon emissions intensity of its investments by half in slightly more than six years as part of its goal of reaching net zero by 2050. The strategy also includes efforts to diversify corporate leadership and enhance existing policies that support sound labor principles.

“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,” CalPERS CEO Marcie Frost said in a statement. “In addition, we are continuing the important work of promoting inclusive corporate leadership and the rights of workers.”

According to CalPERS’ announcement, the sustainable investing strategy is based on “the belief that responsibility for decarbonizing both the portfolio and economy should not be passed off to others by a passive divestment effort.” The new plan partly relies on financial backing for companies that are committed to transitioning to “green” energy production from “brown.”

The pension will also begin surveying external managers to keep track of their diversity and efforts on regulatory requirements and shareowner action under the new strategy, which it added will focus on human capital management by advocating for more corporate reporting, improved workforce valuations and the promotion of labor principles aimed at ensuring fair treatment of workers.

“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,” Peter Cashion, CalPERS’ managing investment director for sustainable investing, said in a statement.

According to CalPERS, the strategy will set clear accountability for the reduction of companies’ carbon footprint, and its investment managers will develop a process to exit certain securities that do not have a credible net zero plan.

“We believe in engaging with these companies,” Cashion said. “But we will make it clear that refusing to move toward climate solutions puts our investments at risk, which is counter to our fiduciary duty.”