The day-long Environmental Initiatives Workshop featured presentations from environmental, business, investment, and corporate governance experts about the trends and challenges associated with the pension fund's environmental investment program.
The Board heard from two nationally renowned experts on how major environmental developments impact businesses and economies: Peter Schwartz, chairman of the Global Business Network, a firm that advises corporations on strategic business and scenario planning, and Stephen Schneider, professor of biology at Stanford University and co-director of the Center for Environmental Science and Policy.
Schwartz and Schneider told CalPERS board members that the preponderance of scientific evidence is clear: global climate change is a reality and that it's a major historical event that will be a catalyst for change that will have profound effects on business and global economies. This will produce investment opportunities in technologies, products, and services that mitigate and respond to global warming.
"Evidence is overwhelming that global warming is occurring," said Sean Harrigan, President of the CalPERS Board. "This development has considerable impact on our investment portfolio because businesses will be forced to respond and adapt to this new reality. While there are risks and challenges to consider, there will also be significant investment opportunities as technologies, products, and services are developed to meet the needs of a changing world."
Earlier this year, the CalPERS Board approved an allocation $700 million for two environmental investment initiatives – a $200 million program that will invest in private equity funds and partnerships that focus on environmentally clean technologies, and a $500 million allocation for investment in public stocks of companies that produce environmentally beneficial technologies or employ business strategies that reduce damage to the environment.
"Global warming is a profound development that will produce opportunities and challenges in the global marketplace," said Rob Feckner, Chair of the CalPERS Board Investment Committee. "We at CalPERS intend to be smart investors by taking advantage of investment opportunities and minimizing potential risks."
Corporate governance experts indicated environmental issues are now viewed increasingly by investors as a significant risk factor as indicated by the recent upswing in the number of shareholder resolutions related to the topic. Most of the resolutions direct corporations to analyze the environmental risks associated with their business, how those risks affect the bottom line, and to regularly report to shareowners on how the risks are being mitigated.
While acknowledging potential opportunities for superior risk-adjusted rates of return for the pension fund, CalPERS investment managers in alternative investments, global equity, and real estate reported that environmental investing is a relatively new area that requires careful study, additional research, and a thoughtful cautious approach.
To further explore environmental investment opportunities, particularly in the private equity sector, CalPERS and the California State Teachers’ Retirement System are co-sponsoring an environmental investment conference March 17, 2005, in San Francisco. A mailing list is being established for those who are interested in registration materials, which are being developed. Interested parties can get on the mailing list by e-mailing their name and address to CalPERS_Conference@calpers.ca.gov.
CalPERS is the largest public pension fund in the U.S., with approximately $177 billion in assets. The System administers retirement and health benefits for more than 1.4 million current and retired California state and local government employees and their families. For more information
