By Muskan Arora
The $350B California State Teachers’ Retirement System is refocusing its sustainability investment program on private market opportunities with an emphasis on climate-focused solutions.
To do so, the US pension giant is considering merging its public side of sustainable investment and stewardship strategies (SISS) program with its wider global equity program, as discussed at the recent meeting.
The documents cited, “the integration of material sustainability factors in active public equity strategies has matured” and will no longer be efficient to maintain two different portfolios. “This shift requires a change to the performance benchmark, whereby the SISS portfolio will now have a blended benchmark based on the respective underlying strategy benchmarks,” as stated in the meeting materials.
The increased overlap between SISS and the public equity portfolio was due to growth in “high-quality institutional investment managers integrating financially material sustainability considerations into investment process.”
Under this program, SISS’ public allocation was able to focus more on risk and return characteristics and consciously include sustainability considerations into portfolio construction.
Through its private portfolio, the pension plan has committed $2.8B to mainly opportunistic climate infrastructure investments, which is almost 55% of the total commitments, followed by hybrid/innovation climate investments that make up 23% and venture and growth equity that are at 18%.
Within its public equity portfolio, CalSTRS allocated $1.1B to active US equity, $876M to active ex-US equity and $1.9B to active global equity, as of December 2024.
The pension plan allocated 20.5% or $30B to its public equity portfolio, as of February 28.
In other news, the pension plan has also slightly changed its exposure by decreasing its target allocation to public equity by 1% and hiking its target allocation of inflation-sensitive bucket by 1%. This is in line with its long-term goals.
