Pension fund sinks $200M in climate future

While it’s not the divestment from fossil fuels that environmentalists have been seeking, New Jersey’s public-worker pension fund is looking to make a major investment in companies working to blunt climate change.

Members of the New Jersey State Investment Council on Wednesday reviewed a plan to invest up to $200 million in a California-based private-equity fund called TPG Rise Climate.

The fund is raising money to invest in “businesses that have a clear and measurable positive environmental impact,” according to documents distributed prior to the meeting.

New Jersey’s proposed investment in the TPG climate fund comes as concerns about global climate change are once again being raised throughout the country, as wildfires burning out West are causing hazy conditions across the state, triggering a series of air-quality warnings.

The proposal also comes just days after Gov. Phil Murphy signed into law a package of clean-energy bills aimed at helping the state meet aggressive goals the first-term Democrat instituted to reduce greenhouse-gas emissions. The new laws will seek to foster increased development of solar power in New Jersey and support the use of more zero-emission vehicles.

Unloading fossil-fuel investments

Still, members of the investment council heard Wednesday once again from environmental activists who want to see the state’s pension fund play a bigger role, including by fully divesting all stakes in the fossil-fuel industry.

“The most-respected investors are realizing that there is no future, for any of us, if we continue to finance the fossil-fuel sector,” said Tina Weishaus, a spokeswoman for the DivestNJ Coalition that has been pushing pension-fund managers to shed all stakes in fossil-fuel companies.

“To stay invested is the riskiest bet you can make for all of us,” Weishaus said.

Much of the state’s nearly $93 billion public-worker pension fund is invested in traditional asset classes like stocks and bonds.

But a significant share of the portfolio has also been devoted to so-called alternative investments, like hedge funds and private equity. This is part of a long-standing diversification strategy aimed at easing the impact of economic downturns on the overall pension fund, which covers the retirements of an estimated 800,000 government workers and retirees in New Jersey.

As part of that effort, the pension fund last year launched its first large-scale foray into backing renewable-energy production, with an up to $100 million commitment to Stonepeak Global Renewables, a New York-based private-equity fund.

At up to $200 million, the stake in the TPG climate fund marks another significant push by the pension fund into climate-related investing.

Climate investing: a smart bet

The case for making the new investment, according to public documents reviewed by council members on Wednesday, includes “favorable macro trends in climate investing,” such as major advancements in climate-related technology and ongoing efforts by corporate leaders to reduce their companies’ emissions.

The main areas of focus for the TPG climate fund will be “clean energy, enabling solutions, decarbonized transport, greening industrials, and agriculture and natural solutions,” according to the documents.

The new investment should also help advance the pension fund’s recently established goals related to sustainable investing and ESG, which stands for environmental, social and governance.

“TPG has a formal ESG policy and a longstanding consideration of environmental, health and safety practices in due diligence, investment decisions and operations,” the documents said.

Earlier this year, members of the investment council heard about ways the Division of Investment, which manages pension-fund assets on a day-to-day basis, has been changing course in recent years in response to concerns about climate change.

They include hiring a new portfolio manager to oversee sustainable investing and launching a major review of the overall, long-term risk that climate change poses to the pension fund.

Meanwhile, the pension fund has also begun advocating as a major institutional investor for more disclosure of climate-related risk, according to Treasury officials.

But environmental activists participating in the DivestNJ Coalition have in recent years repeatedly been calling on the state’s pension-fund managers to shed all investments in companies that have links to the fossil-fuel industry.

The activists have often cited the ongoing impact of climate change on New Jersey itself, including the frequency of damaging flooding triggered by tropical storms and other severe weather.

Those calls continued during Wednesday’s investment council meeting, and in her testimony Weishaus pointed to recent heat waves and the wildfires burning thousands of miles away that have been affecting air quality in New Jersey.

“The world already has all the fossil fuels that we can afford to burn if humanity is to have a future,” Weishaus said.

“Continuing to underwrite fossil fuels knowing the terrible suffering that will unfold threatens the value of your entire portfolio, all aspects of the global economy and the future of humanity,” she said.