CalPERS shifts $500m into internally-run environmental index strategy

Fund changes tack from exclusion of big polluters via external mandates

CalPERS, the $220.1bn (€162bn) US pensions giant has made a major change of tack in its environmental investment in listed companies by switching from an exclusion-based strategy to a $500m internally managed investment in environmentally friendly companies using the 380 companies in HSBC’s Global Climate Change Benchmark Index as its universe. CalPERS’s previous policy, started in 2006, was to exclude big polluters via environmental screens implemented by external fund managers; a strategy which appeared to have dragged on performance. The Californian fund said the new allocation would target companies that work to improve the environment and mitigate the adverse impact of climate change. Rob Feckner, spokesman at CalPERS, said: “Until now, we’ve invested in external managerswhose funds screen out the worst offending public companies. But this more robust, quantitative strategy will allow us on a large scale to support and become more directly involved in positive change by top performers that have improved share value and also done good for the environment.” Companies included in the new portfolio will have to derive a material portion of their revenues from low-carbon energy production. George Diehr, chairman of CalPERS’ investment committee, said that research showed a positive inclusionary methodology for investing in listed companies was more successful than a negative exclusionary approach. Through its Environmental Technology programme, CalPERS has also to date invested $1.5bn in private equity clean-tech mandates.