Dive Brief:
- The California Public Employees’ Retirement System said Monday it’s committing $100 billion toward climate solutions by 2030, more than doubling the value of its low-carbon assets — currently close to $47 billion — by the end of the decade.
- The policy proposal will help accelerate the fund’s goal of reaching net-zero by 2050 through reducing its portfolio’s emissions intensity and investing in renewable energy and carbon capture technologies.
- CalPERS, which is the largest state pension fund in the U.S., said it would increase “portfolio resilience” by integrating ESG and climate risk analysis into its investment strategy and divest holdings from “companies without credible net-zero plans” as they pose a fiduciary risk.
Dive Insight:
The California pension fund, which has over $462 billion in assets under management, said the proposal will also establish clear accountability for companies when it comes to reducing their carbon footprint.
The fund’s net-zero plan states it will provide actual decarbonization for both the economy and its portfolio, and not delegate the responsibility to others through divestment. The plan partially relies on financially backing companies committed to the transition from “brown” to “green” energy production, according to the proposal. Such steps aim to halve the carbon emissions intensity of CalPERS’ investments by 2030.
“We believe in engaging with these companies. But we will make it clear that refusing to move toward climate solutions puts our investments at risk, which is counter to our fiduciary duty,” said Peter Cashion, CalPERS’ head of sustainable investments, in a press release.
CalPERS is also a member of the Net Zero Asset Owner Alliance, which commits to decarbonization in line with global warming of 1.5°C by 2050.
The proposal additionally laid out steps to promote diversity, equity and inclusion, including surveying external managers to keep track of their diversity goals, as well as continued efforts on regulatory requirements and shareowner action. CalPERS said the policy would highlight human capital management by advocating for more corporate reporting, improved workforce valuations and the promotion of labor principles that guarantee the fair treatment of workers.
“We are continuing the important work of promoting inclusive corporate leadership and the rights of workers,” CalPERS CEO Marcie Frost said.
The plan was formally presented to the fund’s investment committee Monday and is expected to be implemented starting this month, according to the proposal. CalPERS will also compile an annual progress report evaluating the fund’s sustainable investment strategy beginning November 2024.
The fund’s DEI efforts are in line with recent legislative measures undertaken by the Golden State to push for more diversity-related disclosures from investment firms operating in California. In October, Gov. Gavin Newsom signed Senate Bill 54, which would require venture capital firms headquartered or operating significantly in California to annually report the number of diverse founders they invest in and disclose data about their race, sexual orientation, gender identity, disability and veteran status.
