For over a year, California Treasurer Phil Angelides has been meeting with bankers, VCs, and environmental, business and labor leaders, and now he’s announced a major proposition to California’s two giant pension funds, CALPERS and CALSTRS, which have $163 B and $113 B respectively (#1 and #3 in the nation).
Flanked by several key players in energy and clean tech, he held a press conference at NanoSolar here in Palo Alto Tuesday morning, which it was my privilege to attend.
The “Green Wave Initiative” includes among other provisions the commitment by the pension funds of $1.5 billion to be invested in new clean technologies and environmentally responsible companies. The goal is to gain long term financial returns while reducing risks — risks to pensioners’ financial security posed by corporate environmental liabilities, and risks of environmental damage, energy security, and climate change. Equally, the opportunities in clean tech are expanding rapidly and represent one of the next big growth arenas.
There are four main parts to the proposal:
1. Investor Activism
California has been a leader in investor activism, demanding transparency, disclosure and accountability from the management and boards of the hundreds of major companies that pension funds are invested in. With recent corporate scandals, this has become all the more significant. Companies that cut corners are careless with environmental responsibilities are just as likely to disappoint investors as those who cook their books, and companies that don’t plan ahead could get hit with future compliance costs big enough to hurt their share prices. CalPERS and CalSTRS will now demand that corporations also provide meaningful and robust reporting of their environmental practices, risks and potential liabilities.
2. Private Equity Investments
The funds already have sizable venture capital and private equity investments (though a small percentage of the total portfolio). This would be extended by investing $500 million into investments that nurture “clean” technologies. A similar initiative in biotech was begun 2 years ago, and now cleantech is a new growth industry offering returns along with jobs and economic growth, while addressing critical environmental issues.
3. Public Equity Investments
The funds would invest $1 B of their stock portfolios with environmentally screened funds, particularly those whose managers have outperformed non-screened counterparts. This should not only reduce risk and increase returns, but also help send the message to corporations.
4. Real Estate Audit
The two funds together own nearly 160 million square feet of office and industrial space, part of a $16 B invested in real estate across the US and in 22 countries. The proposal is that a comprehensive audit be done of the energy efficiency and green practices in these buildings, towards the goal of using “best practices” that reduce long term costs and boost property values.
Angelides has asked CalPERS and CalSTRS to put these initiatives on their agendas for this Spring and Summer.
In supporting remarks, Bob Epstein of Environmental Entrepreneurs (www.e2.org) observed that the next big growth area isn’t always clear to everyone. In 1984, when he was raising money to start Sybase, there was a lot of doubt that enterprise software would be big. He and many others are convinced that cleantech is now clearly on the launch pad.
The Treasurer’s website has additional information on today’s announcement, including the full press release, fact sheets on the four facets of the Green Wave initiative, and the Treasurer’s Nov’03 U.N. speech at CERES’ Institutional Investor Summit on Climate Risk.