About one-fifth of the California Public Employees’ Retirement System public markets portfolio is exposed to potential losses from climate change, the $381 billion pension fund manager reported this week in its first ever climate-risk disclosure report.
The report, mandated by a state law passed last year, will be presented at an investment committee meeting next week.
About 8 per cent of Calpers’ holdings are in the energy sector, the report said, where “policy, market and technology changes may result in the loss of value and/or “stranding” of long-lived and carbon intense energy assets in our portfolio.”
Another 3 per cent of the portfolio is in transportation, where government mandates and consumer preference, among other forces, “may result in the loss of value for fossil fuel-dependent transportation,” according to the report.
About 6 per cent is in materials and buildings, and 3 per cent in agricultural industries, both of which could lose value as a warming globe creates sea level rise and increases the frequency and intensity of drought, wildfire, hurricanes and other extreme weather.
The report showcased how Calpers and other large asset managers are using their holdings as leverage to pressure large polluters to reduce their carbon dioxide emissions, the main source of global temperature increases.
But the report also suggested much more needs to be done. Calpers in September was among insurers and pension funds managing $2.3 trillion globally that pledged to make their portfolios carbon neutral by 2050.
Calpers’ global equity holdings alone were responsible for at least 23.5 million tons of carbon dioxide emissions, the climate-disclosure report showed.
About $12.1 billion, or 18 per cent, of Calpers’ investments in real assets and private equity are in climate solutions including renewable energy, the report said.