10 pension funds with climate investing allocations

Pension funds have been putting billions of dollars to work in climate solutions in recent years. In many cases, these are target allocations or siloed buckets for climate-themed and sustainable opportunities. Pension funds recognise the global tailwinds that make this a financially attractive sector, as well as the opportunity to create positive impact.

Climate as an investment theme has “really long-dated and structural tailwinds”, creating a “unique opportunity set”, according to Nick Abel, co-manager of the California State Teachers’ Retirement System’s Sustainable Investment and Stewardship Strategies programme and NPM influencer. For this programme (read more on it below), Abel has a dual objective to source opportunities for capital appreciation of the total fund and “have a demonstrable positive contribution to a more sustainable global economy,” he says.

Here are 10 pension funds with a mandate to back climate solutions strategies:

1California State Teachers’ Retirement System

CalSTRS has a 1 percent target allocation to climate and low-carbon themed private investments within its $327 billion portfolio. This is part of a 5 percent, multi-strategy target allocation for Sustainable Investment and Stewardship Strategies, a longstanding programme at CalSTRS. The SISS programme has $10 billion in assets, as of June 2023, and has made commitments of approximately $2 billion to climate-themed private funds. Growing its SISS private markets portfolio to meet the 1 percent target allocation is a priority for CalSTRS. Last year, the pension’s investment board voted to increase its entire private equity allocation by 1 percent as a means of giving itself more allowance for low-carbon private equity investments.

2 New York State Common Retirement Fund

NYSCRF has set a $40 billion climate solutions investment target by 2035, to be invested across private equity, debt, infrastructure and green bonds. It is an extension of the fund’s Sustainable Investments and Climate Solutions programme, which was established in 2019 with an initial investment target of $20 billion by 2035; this target was achieved in February 2024, Comptroller DiNapoli announced. The programme is led by Andrew Siwo, head of Sustainable Investments and Climate Solutions and a member of NPM’s 50 influencers list. Investments from the SICS portfolio include a $750 million commitment to Brookfield’s first Global Transition Fund, $300 million to Avenue Capital Group’s $500 million Sustainable Solutions fund and $200 million to The Carlyle Group’s $1 billion Renewable and Sustainable Energy fund.

3California Public Employees’ Retirement System

The California Public Employees’ Retirement System has created a $100 billion investment target by 2030 for climate solutions across asset classes. The US’s largest public pension fund had an estimated $47 billion in assets in this sector, as of Q3 2023, and created the new investment target as part of a wide-ranging climate strategy unveiled at the end of last year by managing investment director for sustainable investments Peter Cashion (another of NPM‘s 50 influencers). Meeting the target would be “consistent with more than a 50 percent reduction in portfolio emissions intensity by [2030]”, according to an internal memo seen by New Private Markets last year.

CalPERS will develop climate investment plans specific for each asset class, including identifying climate sub-themes and managers to back. It has identified three sub-themes: climate change mitigation (such as renewable energy generation, carbon capture and storage, and waste management), adaptations (water management, agricultural resilience and disaster risk reduction) and transition (brown-to-green strategies for hardest-to-abate sectors and assets).

4 Caisse de dépôt et placement du Québec

CDPQ has created two climate buckets: a C$10 billion “transition” fund for decarbonising the highest-emitting industries, and a target to hold C$54 billion in “low carbon” or “green assets” by 2025. CDPQ held C$47 billion in low-carbon assets in 2022, according to its latest annual report, and will set higher investment targets for 2026 and 2027. CDPQ has invested in TPG Rise Climate I, Taronga Group’s Real Tech Ventures I and the debut infrastructure fund of Ardian and FiveT Hydrogen’s joint venture Hy24.

5 Border To Coast Pensions Partnership

Border To Coast has £1.35 billion ($1.6 billion; €1.5 billion) earmarked for private markets climate investments over the three-year period from 2022. The UK pension pool is focusing on sectors such as clean energy, technology, transport, industry, agriculture and carbon sequestration. It aims to deploy around 20 percent of the climate bucket into venture investments in “new technologies, and smaller, more niche strategies that wouldn’t necessarily have formed part of the main [private markets] strategy”, Mark Lyon, deputy chief investment officer at Border To Coast, New Private Markets in 2022. The allocation could be invested in private equity, infrastructure and private credit and is separate from allocations for Border To Coast’s ‘main’ private markets strategies.

6 Oregon Public Employees Retirement System

OPERS’ state treasurer has proposed a $6 billion allocation to “climate positive” and “climate solutions” investments across real assets and private equity. OPERS’ portfolio was valued at $93.8 billion in December 2023; the system already has $2 billion in assets that fit this description, an investment committee meeting in February this year heard. State Treasurer Tobias Read recommended that OPERS’ private equity team should “develop and monitor a pipeline of managers that are fundraising for climate and climate-positive related funds”. The proposals have yet to be approved by OPERS’ board.

7 NN Group

NN Group, a Dutch pensions and insurance provider, has set a target to invest €6 billion into climate solutions by 2030 across real estate, infrastructure, private equity and green bonds. The firm, which has assets worth €198 billion, is eager to deploy its private markets carbon capital in early-stage or development assets to achieve additionality – such as creating additional stock of renewable infrastructure and developing electric vehicle charging and battery systems, Marieke van Kamp, the firm’s head of private markets, told New Private Markets in 2022.

8 PGGM

PGGM, a €240 billion Dutch asset manager which invests on behalf of Pensioenfonds Zorg en Welzijn and other pension fund clients, has an 18 percent allocation to Sustainable Development Investments – opportunities aligned with the SDGs. For its mandate with PFZW, it has set a 20 percent target allocation for SDI investments by 2025.

While these allocations cover both social and environmental goals, PGGM most frequently invests in climate opportunities. It has invested €33.6 billion in clean and affordable energy, sustainable cities and communities and climate action; €1.8 billion in clean water and sanitation; €2.9 billion in zero hunger and  €12.3 billion in good health and wellbeing.

“As a large asset manager, we feel responsible and want to contribute to a more sustainable world,” PGGM states on its website. “We firmly believe that embedding the UN SDGs into our investment process is important. The long-term orientation and the size of the assets invested by PGGM Investments create an opportunity to use the driving power of money in the interests of a more liveable and sustainable world.”

9 Universities Superannuation Scheme

The UK’s USS has created a £2.5 billion ($3.0 billion; €2.8 billion) five-year investment target for decarbonisation solutions across private asset classes. This programme, launched in early 2022 and known as the Sustainable Growth Mandate, invests in climate-focused funds, generalist funds and “fund managers focused on earlier stage energy transition and climate change opportunities where technologies are less proven”, a USS spokesperson told New Private Markets last year. USS is interested in sectors such as carbon sinks (for example, forestry, and carbon capture and storage), renewable energy assets and electric transportation. It invested in TPG’s Rise Climate Fund from this allocation.

USS, which has assets worth £81 billion, created this allocation to support its net zero ambitions and to “enable members to reap the benefits of investing in a broader range of attractive companies who stand to benefit from the global energy transition”, said Mike Powell, head of USS’s private markets group.

10 Public Sector Pension Investments

Canada’s PSP Investments aims to hold C$70 billion ($52.3 billion; €49.0 billion) in “green assets” and C$7.5 billion in “transition assets” by 2026. PSP Investments, which has total assets worth C$230 billion, valued its green asset holdings at C$40.3 billion and its transition asset holdings at C$5.1 billion in 2021.

PSP Investments defines “green assets” in its 2022 climate strategy roadmap as “investments in low carbon activities that lead to positive environmental impacts”; it defines transition assets as “heavy emitters that hold promise to become climate-aligned with assertive mitigation plans”. PSP is an investor in Brookfield’s Global Transition Fund and TPG’s Rise Climate Fund.