Maryland’s CIO Andrew Palmer plans to invest in energy transition through his infrastructure portfolio

By Muskan Arora

While a few may argue that ESG detracts from investment returns, the CIO of $67 billion State of Maryland Retirement and Pension System continues to build his portfolio allocations through an ESG lens that he believes could survive which ever way U.S. elections may sway the highly politicized issue.

In an exclusive conversation with Markets Group, CIO Andrew Palmer spoke about investing in energy transition through his growing infrastructure portfolio.

Though the number of managers and the size of allocation is yet to be determined, the ticket sizes would range $100 million and above.

“The number of managers and the size of the allocation will be determined by how many good managers we find,” Palmer told Markets Group.

“We are reviewing the opportunity set,” he added.

With a focus on investing in the development of greenfield spaces, Palmer is eyeing value added and opportunistic spaces over core strategies and “expect to fund a mix of late stage development of greenfield spaces and operating assets.”

“Being the part of the process that is creating wind farms, creating solar farms, creating green hydrogen plants and you build them and sell them to a long-term holder, would yield higher reward,” said Palmer.

“We want the dollars to be going in and creating a low carbon solution and then repeating that. We think this is going to drive great returns and would be the most impactful,” said Palmer.

The system allocates 4% or $2.6 billion, within their real assets portfolio, against a target of 5% or $3.35 billion, as of September 2023.

The real assets portfolio sits at 15% or $10.05 billion against a target range of 11% or $7.3 billion to 19% or $12.7bn.

The fund roster includes Stonepeak Opportunities Fund and I Squared Global Infrastructure Fund III among others.

The pension plan realised the importance of increasing their allocation to their infrastructure sleeve after attending an educational session on how climate impacts our return forecasts.

Maryland is also set to launch a consultant search to evaluate whether it is possible and profitable for the system to target dollars to in-state investments by examining the size of the private markets in Maryland and the risk and return experience of those investments.