Pension funds, insurance companies and other institutional investors have started creating dedicated pools of capital and investment targets to address the global climate crisis and benefit from the anticipated performance tailwinds of climate investing. Against a backdrop of tightening fundraising conditions for private funds, New Private Markets gathered details of eight such investors.
1. 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 earlier this year.
As part of this allocation, NN Group handed CBRE a €500 million mandate to develop low-carbon affordable housing in the Netherlands.
2. New York State Common Retirement Fund
New York’s government-employee pension has a Sustainable Investments and Climate Solutions investment programme with a deployment target of $20 billion. The programme spans multiple public and private asset classes including private equity, “clean and green infrastructure funds”, “green building real estate funds”, public equities and green bonds.
NYSCRF had deployed “nearly $16 billion” through the SICS programme by July 2022, comptroller Thomas DiNapoli said in a progress report. NYSCRF, which has $246 billion in assets, made a $750 million commitment to Brookfield’s Global Transition Fund in 2022 – the largest ever known commitment to an impact fund.
3. Universities Superannuation Scheme
The UK’s Universities Superannuation Scheme 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.
4. PSP Investments
Canada’s Public Sector Pension Investment Board 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.
SP 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.
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, head of internal management at Border To Coast, told New Private Markets last year. 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. Varma Mutual Pension Insurance Company
Varma Mutual Pension Insurance Company has created a climate allocation that it aims to grow to 25 percent of its total investment portfolio by 2025. The allocation applies to assets “whose business benefits from actions to mitigate climate change”, that have science-based emissions reduction targets and “whose operations offer carbon sinks or carbon capture”, Varma’s 2022 climate policy states. Varma’s climate allocation constituted 18.2 percent of its total portfolio in 2021, according to its 2021 annual report. The Finnish insurance company’s portfolio is currently valued at €56.4 billion.
7. Ontario Teachers’ Pension Plan
Canada’s largest single-profession pension plan has allocated approximately C$5 billion ($3.7 billion; €3.5 billion) to decarbonising industries for the next several years. OTPP is seeking to invest via funds or directly, targeting high-emitting assets in sectors such as power generation, heavy industry, mining and transportation. Assets should have a decarbonisation pathway as part of their value-creation plan – OTPP plans to use its capital “with the goal of helping them decarbonise faster”, OTPP announced in a report earlier this year.
The strategy is led by head of sustainable investing Anna Murray, who joined OTPP in December and also oversees the pension fund’s net zero progress, and sustainability across its portfolio and public markets. The pension fund has assets worth C$242.5 billion, of which 49 percent is allocated to private markets.
8. Environmental Agency Pension Fund
The UK Environmental Agency’s £4.5 billion ($5.5 billion; €5.1 billion) pension fund has a 17 percent target allocation for climate investments. EAPF’s target allocation – to be met by 2025 – applies across asset classes, but the pension is particularly interested in debt funds, chief investment officer Graham Cook told New Private Markets last year. “Transition financing, like most operating capital, is largely going to come from debt. It’s our belief that that’s not going to come from [public or private] equity markets,” Cook said.
EAPF is an investor in Lombard Odier Investment Managers’ 2022-vintage sustainable private credit fund, which issues loans for industrial decarbonisation projects.