New York City comptroller Brad Lander announced in early April that three public pension funds in the most populous city in the US had eclipsed the targets for climate investments a year in advance, while proving that scrubbing their portfolios of fossil fuels had not compromised returns.

“We will not retreat from our strong climate action, a position that remains consistent with our fiduciary duty,” Lander said in a statement. “Climate risk is financial risk, as exhibited by the unprecedented wildfires, extreme flooding, and dangerously hot temperatures [that have] become more prevalent throughout the globe.”

Other public pension plans around the country have made significant commitments to climate investments, but the return of Donald Trump to the presidency has made for a less conducive environment. Trump made his intentions clear in January, when he signed executive orders to withdraw the US from the Paris climate agreement and increase oil and gas production in the country.

“Some may cave to the Trump administration and reverse their climate commitments, but we will not be deterred from jointly prioritising our climate goals and financial responsibilities,” Lander said in April.

Elsewhere, the California Public Employees’ Retirement System, the California State Teachers’ Retirement System and the New York State Common Retirement Fund have told New Private Markets that they remain on track to reach their climate goals on time.

California stays in front

CalPERS unveiled a $100 billion climate action plan in November 2023. It went through its portfolio and identified $47.3 billion in existing climate investments, of which $23.5 billion were in public assets and $23.8 billion were in private assets.

CalPERS’ focuses its climate investments on three distinct areas: mitigation, which includes reducing greenhouse gas emissions; adaptation, which includes preventing or reducing climate disruption; and transition, which includes turning “brown” operations into “green” ones, according to the spokesperson.

Those investments were valued at $50.1 billion at the end of last year, and the pension fund made $3.6 billion in new commitments to climate investments in 2024, according to a spokesperson.

“We expect to reach the target by the end of 2030,” the spokesperson said.

For the remaining $53 billion in the climate action plan, CalPERS expects to deploy around $26.5 billion to private markets climate funds in the next five years, equating to more than $5 billion per year to private markets climate funds.

“CalPERS believes its plan will be successful regardless of any short-term changes in the global economy,” the spokesperson said when asked if the pension fund had to alter its approach to climate investments in the current political and economic environment.

Classifying investments as climate solutions is not without controversy, however. CalPERS faced some criticism in March when activist group California Common Good said the pension plan’s climate solutions portfolio had $3.56 billion in holdings in oil and gas companies, including shares in super-majors BP, Chevron, ExxonMobil and Shell.

CalPERS countered that those companies are working to transition to cleaner energy, at least for part of their operations, and the pension fund wants to invest in those projects.

Across the Tower Bridge in Sacramento, CalSTRS, the second-largest public pension plan in California, is on track to reach a 1 percent target allocation to private investments in climate and low-carbon projects by 2026, according to Daniel Lau, a portfolio manager in the pension fund’s Sustainable Investment and Stewardship Strategies (SISS).

CalSTRS had $350 billion in total investment assets at the end of March, putting the private climate investments target at around $3.5 billion, according to Lau.

The SISS private portfolio, which was created in 2021, had committed nearly $2 billion in investments by the end of June last year, including the acquisition of a 33.3% stake in US renewable energy company Arevon Energy and the development of a green residential building in Brooklyn, New York.

CalSTRS also acquired a stake in Just Climate – a subsidiary of Generation Investment Management – in 2023 and co-anchored $175 million in commitments to Just Climate’s  Nature Climate Solutions strategy in March this year.

“We keep on keeping on,” said Nick Abel, another SISS portfolio manager.

New York State sticks to 10-year target

NYSCRF has deployed $26.5 billion towards its target of $40 billion for sustainable investments and it expects to reach the goal within the next 10 years, according to Andrew Siwo, head of sustainable investments and climate solutions (SICS) at the pension fund.

“Last year, we raised our target sustainable investment commitment to $40 billion from $20 billion,” Siwo told New Private Markets. “We continue to see compelling opportunities, though we remain cautiously optimistic.”

NYSCRF’s SICS portfolio includes investments in private equity funds, green bonds, clean energy infrastructure funds and LEED-certified real estate funds. It also assesses investments in social inclusion, which includes education and diversity programmes, as well as economic development, such as financial inclusion and affordable housing.

The pension plan said in April it had committed $250 million to Oaktree Power Opportunities Fund VII, which invests in companies that provide products and services to infrastructure projects in North America, including energy efficiency and renewable energy, and $150 million to Vision Ridge Partners Sustainable Asset Fund IV, which invests in companies that develop and operate energy transition assets.

According to Liqian Ma, head of sustainable and impact investing research at investment management and advisory firm Cambridge Associates, the products and services that support large-scale energy transition projects represent an “underlying” opportunity for investment.

“They’re finding a holistic approach across multiple asset classes, which will probably resonate in infrastructure, in private credit and other kinds of diversifying assets that have complementary roles in a portfolio,” Ma said of the large pension funds.

Longer fundraising timelines

Among a few big-name investment firms, there are signs that climate-focused products are still pulling in capital, albeit at a slower pace.

TPG, for one, said in an earnings call this month that fundraising for climate investments was taking longer than previously anticipated, thanks in part to political uncertainty in the US.

KKR said in May it had raised $2.75 billion for its first climate infrastructure fund, adding around $400 million since October last year. Brookfield Asset Management meanwhile sounded confident that it would close its second energy transition fund – which has a target of $17 billion – in a matter of months.

In other earnings calls, Apollo Global Management, which had announced an agreement with British bank Standard Chartered in January to invest $3 billion in energy transition projects, did not discuss the partnership or its climate-orientated investment division ACT Capital.

Likewise, Ares Management did not talk about its second climate infrastructure fund, Ares Climate Infrastructure Partners II. Ares unveiled the fund with a $3 billion target in February 2023 and had raised $1.33 billion by January this year. When asked last week about the status of the fund, an Ares spokesperson said the firm was not permitted to discuss individual funds or fundraising.