The California Public Employees’ Retirement System, Sacramento, one of the world’s largest and most climate-friendly investors, is seeking ways to navigate one of President Donald Trump’s top priorities: boosting the US fossil fuel industry and killing green subsidies.
One option for CalPERS is taking companies private if their shares, already hammered by years of headwinds, decline further under Trump. The country’s largest public pension fund, which oversees $527 billion, will also look to finance wind and solar projects, as well as investments in polluting businesses that can be transitioned to more environmentally sustainable profiles.
“We continue to examine opportunities in renewable energy development and in transition (from brown to green) projects,” Peter Cashion, who leads climate investing at CalPERS, said in a statement. “For a variety of reasons, we may also see opportunities in the future of ‘take-private’ transactions around listed renewable energy stocks, given some of the declines in valuation that we have seen over the past few years.”
CalPERS, run by Chief Executive Officer Marcie Frost and Chief Investment Officer Stephen Gilmore, aims to double its exposure to wind, solar and other renewable areas to $100 billion by 2030. While operating on a longer time horizon than a single presidential administration, the fund’s strategy offers a glimpse into how prominent environmentally oriented investors will navigate the White House’s hostility to green policies.
Hours after being sworn in Jan. 20, Trump issued executive orders targeting subsidies and regulations that had made climate-friendly investing more attractive under former President Joe Biden.
Trump’s moves included the likely elimination of electric-vehicle tax credit, rollback of environmental protections and suspension of offshore wind leases. He also ordered the US to withdraw from the landmark Paris Agreement on climate change.
The renewable energy industry has already been under pressure in recent years from higher interest rates, supply chain snarls and inflation.
The WilderHill Clean Energy Index, which includes a range of renewable energy companies, has fallen by more than half over the past two years compared with a gain of more than 50% for the S&P 500 Index. Trump’s executive orders also contributed to a 16% two-day decline in offshore wind developer Orsted.
CalPERS would be well positioned to partner with private equity firms if renewable energy companies become prime acquisition targets, said Panos Patatoukas, an accounting professor at the University of California, Berkeley.
“It just so happens that in this cycle, green companies become undervalued,” Patatoukas said.
Cashion, CalPERS’ climate investing head, said the fund is still working to craft its climate strategy under Trump. Despite the president’s zeal for oil, Cashion expressed optimism about renewable energy investments.
“We see the new administration as being pro-energy, and as an investor in energy, including renewables, with a particular focus on renewables if it’s cost-competitive, we believe that will not be negatively impacted,” he said in separate comments before Trump’s inauguration.
“We may end up doing a lot of large infrastructure-type investments in the U.S., which are big dollar volume,” he said. “We may end up doing less venture climate tech if it depends on Department of Energy low-cost loans or guarantees.”
Other options include increasing ESG investments abroad in countries with more supportive policies on renewables, though no geographic decisions have been made, he said.
Kirsten Spalding, a vice president at Ceres, which works with large shareholders and major companies to reduce carbon emissions, said ESG investing will continue although the rhetoric has changed.
“Investors are just going to find new ways to do the work,” she said. “If our work doesn’t have a banner over it, it doesn’t mean the work stops.”