CalSTRS Releases 8th Annual Green Initiative Task Force Report

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Environmentally-focused strategies nearly triple green bond purchases

“But more importantly, we hope our actions will help catalyze incentives for comprehensive climate change initiatives," noted CalSTRS Chief Executive Officer, Jack Ehnes.

California State Teachers’ Retirement System’s (CalSTRS) eighth annual Green Initiative Task Force report shows an almost 300 percent increase in green bond purchases within the Fixed Income portfolio. This year, the Teachers’ Retirement Board identified sustainable investing as a key, strategic priority, which is reflected in the report and other initiatives.

The growth in green bonds aligns with a commitment that CalSTRS Chief Executive Officer Jack Ehnes made during his participation in the 2014 Climate Summit where he announced that CalSTRS will more than double the fund’s clean energy and technology investments of $1.4 billion to $3.7 billion over the next five years. The move is in response to United Nations Secretary-General Ban Ki-moon’s call for bold action to build resilience to the impacts of climate change.

“Targeting the clean energy and technology sector provides a good investment opportunity while positioning CalSTRS for a low-carbon future,” noted Ehnes. “But more importantly, we hope our actions will help catalyze incentives for comprehensive climate change policies that ultimately lead up to a global agreement in Paris in 2015.”

CalSTRS sees a growing number of investment opportunities in low-carbon solutions, especially as renewable technology costs come down and regional clean energy policies take hold.

“Our growth of green-related investments is a good example of successful engagement on environmental and climate risk issues,” said CalSTRS Chief Investment Officer Christopher J. Ailman. “Looking forward, we hope to bring more attention to the role large institutional investor’s play in financing green bonds, clean energy and climate change initiatives.”

Currently, CalSTRS holds $98 million in green bonds within the Fixed Income asset class, up from $25 million in 2013. Environmental initiatives within this asset class are focused on risk management and climate change investment opportunities. CalSTRS observed an uptick in green bond opportunities as several first-time issuers entered the market with USD deals, including Bank of America, Regency Centers and Export Development Canada.

Additional commitments within the Inflation Sensitive asset class bring the total value of investments to $253 million, up from $52 million in 2013. The Infrastructure Program within the Inflation Sensitive asset class targets operating and cash-generating essential services, such as solar energy projects, wind energy projects, hydropower and other energy-efficiency based assets.

The Green Initiative Task Force 2014 Annual Report highlights CalSTRS asset classes’ efforts in integrating environmental considerations for fiscal year 2013-2014. The Green Initiative Task Force, known as the “Green Team,” was established in 2007 to identify, analyze and propose investment opportunities and risk-control strategies addressing climate change. Since then the focus has pushed beyond carbon emissions to consider risks and opportunities related to issues such as land use, water sourcing, mineral extraction and waste disposal.

The California State Teachers’ Retirement System, with a portfolio valued at $186.4 billion as of September 30, 2014, is the largest educator-only pension fund in the world. CalSTRS administers a hybrid retirement system, consisting of traditional defined benefit, cash balance and voluntary defined contribution plans. CalSTRS also provides disability and survivor benefits. CalSTRS serves California's 868,000 public school educators and their families from the state’s 1,600 school districts, county offices of education and community college districts. Follow us on Twitter @CalSTRS

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Gretchen Zeagler

Gretchen Zeagler
CalSTRS
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