As an investor in the global economy, the scale and multi-faceted nature of climate change presents a systemic risk to our portfolio. Climate change impacts investors like us in two main ways:

  • Physical impacts (e.g. wildfires, extreme weather, sea-level rise, drought) can affect our fixed assets (e.g. real estate) and disrupt portfolio companies' supply chains and operations. Climate change's acute and chronic physical impacts can affect people's health, food security, migration, water supply, and other ecosystem services in ways that could bring heightened volatility to financial markets and harm economic growth.
  • Transition risks, or shifts in policies, technologies, industries, and customers, due to changed climate norms or movement toward a lower-carbon economy can affect the financial success of existing business models and industries. Our portfolio companies' long-term success depends on the degree to which they can successfully navigate the transition.

Through our engagement and advocacy efforts we're working to minimize the absolute risk from climate change to our portfolio. Through our research and integration efforts we are working to understand the financial risks to our portfolio and prepare for the long-term changes that will accompany climate change. 

Our Sustainable Investments Program leverages the best available science and tools to inform investment decisions with key insights into the highest-value climate change-related risks and opportunities.  We also work to identify and focus on the largest opportunities for financially attractive emission reductions across the fund, and advocate for policies that can drive the transition to a thriving low-carbon global economy in which we can invest.

Below you will find more information on our climate change-related activities.

Physical risks: Scientists have developed climate models to forecast the frequency, intensity, and location of these impacts from climate change over time. Piloting research from Wellington Management and Woods Hole Research Center, we're researching potential links between these models and financial risks and opportunities to develop investment insights.

Transition risks: To understand the concentration of carbon emissions in our portfolio, we're measuring the carbon footprint of each asset class. So far, we have conducted carbon footprints of our Public Asset classes. We expect to complete the mapping of our Private Assets portfolios within the next few years.

Climate-related risk reporting: In compliance with Senate Bill 964, view Addressing Climate Change Risk (SB 964) (PDF).

Opportunities: We seek to systematically identify, implement, and track economically attractive opportunities to enhance portfolio returns and reduce emissions through activities such as the Real Estate Energy Optimization (EO) Initiative (PDF).

The EO initiative seeks to:

  • Reduce carbon intensity to help mitigate the systemic risk of climate change to the real estate portfolio and more broadly our total fund
  • Enhance returns and the long-term value of our investments through capturing energy cost savings
  • Improve the attractiveness of the assets to tenants

Additionally, the initiative seeks to facilitate transitioning our real estate portfolio towards carbon neutrality where it adds value to performance.

  • Since at least 2009, we've repeatedly weighed in on domestic and international policy in support of greater disclosure from companies on climate-related financial risks, reduced fossil fuel subsidies, and regulation that prices carbon emissions.
  • "We Are Still In": We advocate to the G7 and G20 for implementation of the Paris Agreement and for strengthening country commitments with the goal of limiting the global temperature rise to 1.5° above preindustrial levels.
  • Read the 2018 Global Investor Statement to Governments on Climate Change (PDF), which CalPERS supports.
  • We believe that pricing carbon emissions facilitates the transition to a low-carbon economy through market mechanisms, which is an investor-aligned approach. We support pricing carbon emissions at a meaningful level to effectively drive the transition to a low-carbon economy.
  • We advocate for integrated reporting in line with our Total Fund Governance and Sustainability Strategic Plan (PDF).

Global greenhouse gas (GHG) emissions largely come from burning fossil fuels and land use change such as deforestation.

Climate Action 100+

After conducting our public assets' carbon footprint in 2015, we discovered emissions were heavily concentrated. In fact, out of the 10,000+ companies within our portfolio, only 80 companies were found responsible for 50 percent of the portfolio's GHG emissions.

The emission trajectory of these top emitters – or systemically important carbon emitters – is critical to whether the global economy meets the 2 degrees Celsius temperature rise limit set out in the Paris Agreement. We also recognized that other peer asset owners likely had the same top emitters within their portfolios.

With this insight, we worked with organizations, such as Principles for Responsible Investment (PRI), Ceres, and Institutional Investors Group on Climate Change (IIGCC) to launch Climate Action 100+, a five-year global initiative now supported by 300+ investors representing more than $33 trillion in assets and focused on the world's top 161 publicly traded systemically important carbon emitters or companies with significant opportunity to drive the transition to a low-carbon economy.

Throughout 2018-19, we served as the inaugural chair of Climate Action 100+ Steering Committee and began leading engagement with 20 companies on the focus list. The initiative requests the boards and senior management of companies do the following:

  • Implement a strong governance framework that clearly articulates the board's accountability and oversight of climate change risk and opportunities.
  • Take action to reduce greenhouse gas emissions across their value chain, consistent with the Paris Agreement's goal of limiting global average temperature increase to well below 2-degrees Celsius above pre-industrial levels.
  • Provide enhanced corporate disclosure in line with the final recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and, when applicable, sector-specific Global Investor Coalition on Climate Change Investor Expectations on Climate Change to enable investors to assess the robustness of companies' business plans against a range of climate scenarios, including well below 2-degrees Celsius, and improve investment decision-making.

We continue to serve on the committee and guide implementation work.

Deforestation & Land Use Change

Deforestation is the conversion of forested to non-forested land, often for agricultural reasons. It results in the release of stored carbon and prevents additional carbon absorption and storage.

Forests provide numerous benefits — they play a key role in promoting well-functioning watersheds that companies and economies rely on and protecting global biodiversity. They're currently one of the best available "technologies" to absorb and store carbon, helping protect our global investment portfolio from the physical risks of climate change by reducing carbon dioxide levels in the atmosphere.

Companies that aren't aware of risks related to deforestation and human rights concerns in their supply chains are vulnerable to reputational, regulatory, and other business risks.

We look at the drivers of deforestation across our global portfolio, various industries, and commodities.

Advocacy Efforts and Key Partnerships

2019 CalPERS Letter to Senators

In February of 2019, we responded to an inquiry from eight U.S. senators about our approach to deforestation. In our response, Approach to Managing Environmental, Social, and Governance Risks Related to Investments (PDF), we highlighted current initiatives such as updating our Governance and Sustainability Principles (PDF) to include deforestation, joining the UNPRI and Ceres working groups, and engaging with companies that have commodity-linked deforestation within their supply chains. We also highlighted the important role policymakers can play by creating a policy context that incentivizes the companies in which we invest to employ sustainable business practices while generating returns.

Investor Sign-On Letters

Read investor expectations statements that we support:


As a member of the Investors Initiative for Sustainable Forests (PDF) and Investor Working Group on Sustainable Palm Oil, we support efforts to reduce deforestation caused by portfolio companies. As such, we joined fellow investors in requesting stronger standards for certifying the sustainable production of palm oil through the Roundtable on Sustainable Palm Oil.

Partnerships are critical to our climate change strategy as they allow us to share experience, pool resources, and magnify our influence. As a member of global investment networks, such as the Principles for Responsible Investment (PRI) and Ceres, we've engaged companies on emissions reductions and disclosure of key metrics, and transitioned from regionally focused activities to global initiatives such as those listed above.

Encouraging companies and cities to disclose environmental impact
CalPERS: Member

Climate Action 100+
Ensuring the world's largest corporate greenhouse gas emitters take necessary action on climate change
CalPERS: Co-Founder and Steering Committee Member

UN Principles Responsible Investment
Network to incorporate ESG issues into decision making and ownership practices
CalPERS: Founding Signatory and Active Member

Transforming the economy to build a sustainable future for people and the planet
CalPERS: Founding Signatory, Holds Board Seat and Active Member

Council of Institutional Investors
Promoting governance policies that enhance long-term value for institutional asset owners and their beneficiaries
CalPERS: Co-Founder Co-Chair of International Committee

International Corporate Governance Network
Promoting effective global standards of corporate governance and investor stewardship
CalPERS: Co-Founder, Holds Board Seat, Chair of Disclosure & Transparency Cmte

G7 Investor Leadership Network
Collaborating with investors in G7 countries interested in addressing sustainability and long-term growth
CalPERS: Steering Committee Member

Sustainable Accounting Standards Board
Developing standards to help businesses manage and report on the sustainability topics that matter most to investors
CalPERS: Investor Advisory Group Member

United Nations Net Zero Asset Owner Alliance
Alliance of investors committed to accelerating decarbonization in line with 1.5°C by 2050.
CalPERS: Founding Signatory and Active Working Group Member