In brief: CalSTRS proposes increasing PE bucket to make more climate investments

In what could be a milestone climate impact investing in private markets, CalSTRS' investment committee will consider increasing its private equity allocation from 13% to 14% on Thursday.

Staff at the California State Teachers’ Retirement System will ask its investment committee on Thursday to increase its private equity allocation to 14 percent in order to increase its investments in climate solutions.

While only a marginal increase in percentage terms – the current allocation is 13 percent of the pension’s assets – it would equate to more than $3 billion if approved.

While many investors are creating dedicated pools of capital for climate investments, these typically sit within or are overlaid on top of their larger asset class buckets. The CalSTRS proposal involves shifting the underlying allocations to meet its climate investing ambitions. “Over the long term, investments that support an orderly transition should reduce risk and improve risk-adjusted returns,” the CalSTRS’ staff memo states.

Stay tuned: we’ll bring you an update on this proposal following CalSTRS’ investment committee meeting.