CalPERS goes big on the green transition

CalPERS, America’s largest public pension fund, is more than halfway towards its goal of investing more than $100 billion in climate solutions by 2030. The investor, which manages $502.9 billion in assets, recently announced it has committed more than $53 billion to climate adaptation, transition, and mitigation efforts.

The investment goal is enshrined in CalPERS Sustainable Investments 2030 strategy where the pension fund pledges to cut portfolio emissions in half by 2030 – on route to net zero 2050 – in spite of the political pushback against ESG investment in the US.

CalPERS’ push into green assets also comes when many governments are trying to drive pension fund investment into green solutions.

“The energy transition underway represents one of the biggest investment opportunities in history,” said CalPERS chief executive officer Marcie Frost. “We are providing the capital necessary to plant the seed for the low-carbon economy of the future.”

In a reflection of the growing allocation, CalPERS is in the process of building out its sustainable investment team to 20, hiring eight more staff members in this area in the next few months.

CalPERS’ latest commitments comprise $3.6 billion in climate solution investments made over 2024 focused on private equity and infrastructure. The pension fund has partnered with asset manager Brookfield and where investments will focus on the clean energy transition, including investments to enhance power grid reliability across multiple Midwest and Mid-Atlantic states.

Last year, Mark Carney, vice chair of Brookfield Asset Management and head of transition investing at the manager, was a guest speaker at the CalPERS investment committee meeting. He said that asset emissions will be inextricably tied to financial performance in the years ahead and argued this is already visible in how low-emitting companies within a sector currently trade at a premium.

CalPERS’ climate investments also include a private equity investment partnership with TPG Rise Climate. The fund focuses on scaling climate solutions globally and the partnership seeks to invest and collaborate in opportunities across the fund’s core themes including energy transition, green mobility, sustainable fuels and molecules, and carbon solutions.

Other climate solutions funded by CalPERS over the past year include an investment in Octopus Energy, a fast-growing renewable energy company based in the United Kingdom. The company uses an advanced operating system to power six million homes in the UK and 60 million homes globally, and is expanding operations into the US.

CalPERS made this investment alongside Australian pension fund Aware Super, both partnering with Generation Investment Management, Al Gore’s investment fund. The Canada Pension Plan Investment Board also increased its stake in Octopus at the time

“We believe that making sound, long-term investments in climate solutions will generate outperformance while also providing the clean energy needed to meet the increased demands that people have for their homes, cars and technology,” said CalPERS CIO Stephen Gilmore.

Beyond the fully executed deals, CalPERS is reviewing an additional $3.2 billion in climate-related investments. The investor said some of these investments could be finalized in the coming weeks and months.

Earlier this year Peter Cashion, managing investment director for sustainable investments told Top1000Funds.com that CalPERS doesn’t target a a fixed number of climate investments for each asset class but focuses instead on a range. He said the aim is to both generate alpha and reduce the carbon intensity of the portfolio. CalPERS approved plans to increase its overall allocation to private markets from 33 per cent of plan assets to 40 per cent.

“We see investment opportunities across the spectrum with the most tangible in infrastructure, private and public equities,” he said.