By Muskan Arora
The $502bn California Public Employees’ Retirement System will commit
$10bn to help the world transition to a low-carbon
economy, and to reduce greenhouse gasses.
CalPERS aims to invest $100bn in climate solutions by the end of 2030, alongside establishing an accountability process for companies to disclose and strengthen their plans toward the energy transition, as per a recent press release.
The investments within the plan focus on three main areas:
- mitigation (which seeks to invest in areas that reduce greenhouse gasses, and include carbon capture, waste management and renewable energy.)
- adaptation (which seeks to manage water supply, rethink agriculture, and prepare for natural disasters.)
- and transition (to incentivize high emitters toward more climate friendly operations.)
"The CalPERS Climate Action
Plan is designed to make our pension fund the global partner of choice in
climate investing," said Peter Cashion, managing investment director of
the CalPERS Sustainable Investments Program, in the press release.
"To do that, we need a diverse set of investments and tools
to generate the excess returns that are achievable during this historic
transition to a low-carbon future," he added.
The new actions, worth $9.7bn, include a customized Climate Transition
Index, which allocates $5bn in public equity investments “to a scalable alternative to capitalization-weighting.” The index
will monitor both the risks and opportunities in the global energy transition.
Another nine commitments of $1.1bn in private investments will be made in sectors
that are supporting energy production and distribution alongside freight and
supply-chain optimization.
Lastly, additional private market commitments worth $3.6bn will be finalized in the near future.
“The CalPERS Climate Action Plan is designed to take advantage of the rapid growth in
climate transition investment opportunities, the kind of high-quality
investments that are essential in paying the retirement benefits promised to
our members and their families," stated CalPERS Chief Executive Officer
Marcie Frost, in the press release.
"As we continue to measure
the portfolio risks posed by climate change, our long-term strategy must also
include providing some of the capital needed to finance the decarbonization of
the global economy," she added.
CalPERS has committed $47bn in climate solutions since November when the sweeping climate plan was first presented to the board.
By 2030, the system expects the
numbers to double and carbon intensity of the pension fund’s portfolio to
decrease by minimum 50%.
Recently, CalPERS named COIO
Michael Cohen as the chair for its Climate Action 100+ steering committee.
Additional details will be provided by the board at the July 15th
meeting.
