Private debt GPs seeking CalPERS’ capital should be prepared to answer questions about ESG. The California Public Employees Retirement System – which has a $9.2 billion allocation to private debt – “reviews how external managers incorporate ESG into their investment decision-making through the Due Diligence Questionnaire and annual review processes,” according to a presentation accompanying the system’s board meeting yesterday.
It is not clear from the presentation how recent a development the pensions’s private debt ESG integration is. It noted that “although still in the early stages, private debt managers continue to improve on ESG-related engagements”. It provided two examples: “A manager embedded a ratcheting mechanism to lower interest rates as the borrower meets certain criteria, to ensure ongoing ESG engagements. A manager has taken the initiative to have one of their funds to be Article 8 compliant.”
CalPERS, which has assets worth $442.6 billion, is particularly notable for its ability to write large cheque sizes: it committed $1.1 billion to Ares Capital’s fifth Europe fund, which raised €11 billion; and $3 billion to Goldman Sachs AM’s first West Street Strategic Solutions fund, which raised $13.8 billion.
Editor’s note: This article has been updated to reflect a more recent assets under management figure for CalPERS.