CalPERS expands climate investments. Some groups want more transparency

SACRAMENTO, Calif. — In the two years since it made the substantial pledge to invest $100 billion in climate solutions by 2030, California’s largest pension fund revealed last week that it is 60% of the way towards reaching that goal.

In 2023, the California Public Employees’ Retirement System announced it had already had $47 billion in investments in companies involved in mitigation, adaptation and transition strategies related to climate change. As of June, CalPERS has invested an additional $13 billion, said Peter Cashion, the fund’s investment director in charge of sustainable investments.

“That puts us on track for the $100 billion,” Cashion said in an interview. “Which is, I think, positive particularly in light of the negative sentiment in this past year around climate, at least in the US.”

Despite the Trump administration’s efforts to cut clean energy investments, Cashion said that CalPERS sees strong future opportunities, both in the U.S. and internationally, for future investments in climate solutions.

Allie Lindstrom, a senior strategist for the Sierra Club’s Sustainable Finance campaign, applauded CalPERS for its ambitious climate action plan and cited the country’s largest pension fund as a leader in pushing companies to pursue more sustainable practices, including encouraging businesses to publish their emission records.

But an area of continued concern is what exactly CalPERS defines as climate solutions, Lindstrom said. The pension fund doesn’t publicly disclose what’s in its climate action plan, she said.

“As advocates, we’re looking for transparency because we want to better understand the plan and where it needs to be strengthened,” Lindstrom said. The portfolio needs to be transparent so that other investors that look to CalPERS, as the country’s largest public pension fund, can replicate that model, she said.

What constitutes a climate solution?

Earlier this year, the coalition California Common Good published a report that said CalPERS was mislabeling investments in major oil and gas companies such as British Petroleum, Chevron and ExxonMobil as climate solutions.

The report caught the attention of at least one California lawmaker.

“To learn that the so-called Climate Action Plan includes public equities in most of the world’s largest oil and gas companies, including companies operating in our state that are endangering public health, is a disservice to the intent of the Board of Trustees, beneficiaries and to the hardworking people of California. CalPERS must embrace full transparency and take more powerful action toward real change,” California Senate Majority Leader Lena Gonzalez said in a March statement announcing the report’s findings.

Shortly after, CalPERS presented a rebuttal that said the report lacked context and misconstrued numbers about the pension system’s sustainable investments. Of the technology investments in the major oil and gas companies the report highlighted, those made up less than 1% of the total sustainable investments, Chief Executive Officer Marcie Frost wrote in the March letter.

“These tiny percentages are hardly evidence of some diabolical attempt to rebrand oil and gas companies as climate champions,” Frost said.

Eric Lerner, the climate, justice and corporate accountability director at the Alliance of Californians for Community Empowerment, disagreed with Frost’s statement. Even small investments in fossil fuel companies compromise the integrity of the climate action plan, he said.

“Whether 5% of Exxon is green or not, kind of misses the point,” Lindstrom said.

On this point, Frost said that a “green asset is a green asset, regardless of corporate ownership.”

On track to meet sustainable investment goals

Another sustainable investment goal of CalPERS is to balance the carbon emissions from companies in CalPERS’ portfolio by 2050. Cashion noted that the pension fund plans to achieve this by offsetting those emissions with carbon credits.

He said CalPERS emission intensity reduced 11% during the last fiscal year. That metric, which Cashion defined as “emissions per dollar invested,” is decreasing in large part due to the billions of dollars of investments the fund has recently made in electric vehicles, renewable energy and other climate solutions.

The pension fund is on track to reduce emission intensity by 50% within the next five years, Cashion said, but the eventual goal of achieving net-zero emissions is a “pretty big ask.” He said that will depend on to what extent the economy is decarbonized.

CalPERS doesn’t support divestment from oil and gas companies, Cashion said. Instead, the fund has shifted its investment within the fossil fuel industry from companies that don’t consider climate risks, to those companies that do have a net-zero plan.

“We wanted to differentiate between those that had a net-zero plan and were factoring in climate risk, in particular transition risk, because we see that in the long term those companies can perform better,” Cashion said.

Moving forward, Cashion said he is encouraged by the possibility of future investments in climate solutions, particularly in the renewable energy area. In the U.S., power demand is increasing, driven by data centers powering artificial intelligence technologies and electrification broadly. Renewables, he noted, are often lower cost and faster to market.

While CalPERS is still on track to meet its $100 billion by 2030, Cashion said the fund’s first priority is its returns.

“So if we hit it in 2033, but we made better investments, that is completely fine,” he said.

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