Managing Investments for Sustainable Returns

All investments have risks. We have a fiduciary duty to minimize risk in our portfolio and take advantage of opportunities on behalf of our 1.9 million members.

We can help maximize returns by staying informed about potential threats to certain industries or geographic areas. One example of the risks that our investments face comes from catastrophic climate events that could negatively impact our real estate holdings.

Four-panel diagram demonstrating how a real estate investment can be damaged by climate events. The risk from catastrophic climate events leads to increased cost of maintenance and insurance, which is ultimately a risk to CalPERS' portfolio value.

California is now experiencing wildfires year-round, with both fire damage and insurance costs continuing to rise. California Climate Change Assessment predicts that by 2055 wildfire insurance costs will rise by 18%.

Line graph detailing the increase in structures destroyed and acres burned by wildfires from 2009-18. In 2009, the number of structures destroyed was below 5,000, and the total acres burned was below 200,000. In 2018, the number of structures destroyed was above 20,000, and the total acres burned was above 800,000.

Source: CalFire

Weather-Related Insured Catastrophe Losses Are Rising Worldwide (at 2017 prices)

Bar graph detailing the costs of weather-related catastrophes and man-made disasters worldwide from 1970 to 2017. From 1970 until 1991, the total yearly cost for both was below $40 billion. The total year cost rose above $120 billion in 2005, 2011, and 2017. In most years, weather-related catastrophes account for the majority of the costs.

Source: Swiss Re Institute

What Is CalPERS Sustainable Investing Strategy

It is a risk minimizing tool. We manage potential risks to our investments throughout our portfolio and across all asset classes. These risks can include climate change, poor workforce management, or an ineffective board of directors.

It allows us to focus on returns. Minimizing risks to investments and avoiding potential risks and identifying attractive opportunities is an important and strictly financially motivated process for protecting the fund and making sound investments.

It provides a foundation for engagement. We engage with companies over issues that we believe can negatively impact a company's bottom line. By engaging, as an owner of the company, we use our voice to motivate change.

How CalPERS Achieves Its Sustainable Investing Goals

Advocacy — Working with financial market regulatory organizations like the SEC, we advocate for standards that protect investors like CalPERS, as well as enhancing corporate reporting on subjects like board and workforce diversity, and climate risk.
Integration — The Energy Optimization initiative involves maximizing the energy efficiency of existing CalPERS real estate assets to improve the long-term value of the buildings.
Engagement — The Climate Action 100+ initiative is a collaboration of investors worth $32 trillion from all over the world engaging with the world's largest greenhouse gas emitters to curb emissions and strengthen climate related financial disclosures.
Research — We are working with scientists to learn which geographic areas could be at risk to climate related incidents.