The New York State Common Retirement Fund said Thursday that it has spent $800 million in climate-related investment strategies, focusing on fixed income and private credit.
The third-largest state pension program in the US made three separate investments last month, including $250 million into Calvert Social Investment Fund for green bonds. Another $250 million went to Nuveen’s Core Impact Bond Strategy, which specializes in renewable energy, climate change, natural resource conservation, affordable housing, and economic development.
It also invested $300 million into an impact fund from Avenue Capital Group. The New York firm, known for betting on distressed debt, has a strategy directed at small- and mid-cap companies in renewable energy, recycling, and waste management. Avenue Capital’s impact fund targets private credit, senior secured lending, second lien debt, mezzanine debt, and private equity and warrants.
“New York state’s pension fund will continue our leadership on the issue of climate change and take advantage of the opportunities created by the global transition to a lower carbon, sustainable economy to strengthen the fund,” New York State Comptroller Thomas P. DiNapoli said in a statement.
While sustainable investing has picked up speed in the world of public equities, it has been slower-going for fixed income and private credit. The New York strategies might serve as a model for some investors who want to find a workable green investment strategy.
“As we get more and more investors who are interested in the space, they’re starting to allocate more of their entire portfolio across asset classes.” said Jon Hale, head of sustainability research at Morningstar, the investment research organization.
Nuveen’s bond strategy fund, for example, invests in Fannie Mae and Freddie Mac mortgage securities that concentrate on affordable housing, rather than single-family homes from typical bond funds.
In the corporate world, Starbucks issued “sustainability bonds”—issued around environmental initiatives by companies—in 2017 to support environmentally conscious initiatives, such as investing in recyclable packaging. Governments typically issue green bonds to support local initiatives, such as improving water treatment plants.
The New York pension plan’s investments also come within a year of making a climate action pledge. In June, DiNapoli said the fund will double its sustainable investments commitment to $20 billion, from $10 billion, over the next decade. Since 2015, the fund has allocated about half, or $8.5 billion, to that overall commitment.