Three senior House Republicans have opened a formal investigation into the California Public Employees’ Retirement System after the pension giant reported a loss over time of more than $330 million on a clean energy investment, raising concerns about whether political and environmental priorities were placed ahead of workers’ retirement security.
In a letter published Thursday and sent to CalPERS Board of Administration President Theresa Taylor, three representatives—House Committee on Education and the Workforce Chair Tim Walberg, R-Michigan; House Health, Employment, Labor and Pensions Subcommittee Chair Rick Allen, R-Georgia; and Kevin Kiley, R-California—requested on behalf of the committee detailed records related to the pension system’s investment in the CalPERS Clean Energy and Technology Fund. The lawmakers intend to examine whether CalPERS’ environmental, social and governance strategy is consistent with common law fiduciary duties and the tax laws for governmental pension funds that require public pension fund trustees to act exclusively for the benefit of employees and beneficiaries.
According to the committee, CalPERS has invested more than $468 million in the Clean Energy and Technology Fund since 2007. As of March 31, 2025, that investment had dropped to less than $138.1 million—a decline of roughly 71%. As of February 12, the total market value of all of CalPERS’ assets was $610.49 billion, according to data on its web site.
In the letter, the lawmakers argued that the losses reflect a broader pattern of prioritizing ESG considerations over fiduciary obligations to public workers. They noted that as a governmental pension plan, CalPERS qualifies for favorable tax treatment under Internal Revenue Code Section 401(a), treatment available only to plans maintained for the “exclusive benefit” of employees and their beneficiaries. The lawmakers contended that using pension assets to advance social or political objectives could jeopardize that status.
IRC Section 401(a) enables governmental plans to have tax-exempt status, allowing investment earnings to grow on a tax-deferred basis. Section 401(a) also enables contributions to the pension fund to be made on a pre-tax basis and certain employer contributions to be exempt from federal income tax.
The representatives’ probe also seeks information about CalPERS’ due diligence process before investing in the fund; the terms of the investment; monitoring practices; consultant and advisory expenses; and any costs associated with promoting or managing the fund.
In 2007, when the investment in question was made, the CIO of CalPERS was Russell Read, who departed the organization in 2008.
Beyond the clean energy investment, the letter highlighted CalPERS’ broader Sustainable Investments Program and its $100 billion Climate Action Plan, questioning whether such initiatives align with requirements that pension funds be managed solely to provide benefits.
CalPERS, the largest public pension fund in the U.S., manages retirement and health benefits for more than 2 million California public employees, retirees and their families.
The representatives’ letter asked CalPERS to respond by February 27 with requested documents and explanations. The lawmakers indicated the findings could inform potential legislative reforms to federal pension and tax laws if existing enforcement mechanisms are deemed insufficient.
CalPERS has previously defended its private equity strategy and climate-focused investments as part of a long-term diversification plan.
Republicans have sought to limit the role ESG plays in investing. Allen, for example, introduced a bill that has since cleared the House, limiting fiduciary consideration of “nonpecuniary factors” such as ESG factors when managing retirement investments under the Employee Retirement Income Security Act, requiring fiduciaries to instead focus solely on maximizing returns.
Senator Bill Cassidy, R-Louisiana, introduced companion anti-ESG legislation in the Senate that mirrors the House bill.
Public pension funds for state and local government employees are generally exempt from ERISA, which governs U.S. private sector pension funds. Governmental pension funds are largely governed by state and local laws.
“We received and are reviewing the U.S. House Committee letter regarding the nearly two-decade-old investment,” a CalPERS spokesperson said in a statement. “As their investigation is ongoing, we have nothing further to add on the matter.”
Tags: Anti-ESG Legislaton, CalPERS