CalSTRS restructures its SISS portfolio management teams, shifting focus towards private market investments.
CalSTRS Shifts SISS Portfolio Towards Private Markets and Climate Solutions
The California State Teachers' Retirement System (CalSTRS) is revamping its Sustainable Investment and Stewardship Strategies (SISS) portfolio, focusing on increasing investments in private markets and intensifying climate solutions.
The strategic shift, announced recently, aims to capitalize on opportunities in private markets where climate solutions, such as renewable energy, clean technology, and other sustainable innovations, are increasingly prevalent. This reorientation aligns with CalSTRS's net-zero emissions ambition and broader environmental, social, and governance (ESG) investment criteria.
The SISS portfolio's overhaul includes a move towards private markets, suggesting a strategic reduction of traditional public market allocations in favour of private assets that can deliver more direct climate impact. This shift is likely to involve working with specialized asset managers focused on climate solutions and sustainability-driven private investments.
As of December 2024, 19% of the SISS portfolio was allocated to private markets, with significant exposure in infrastructure (55%), hybrid/innovative investment (23%), and venture and growth assets (18%).
In a notable move, CalSTRS plans to deploy 1% of its overall assets, amounting to $3.6 billion, into the SISS portfolio for climate solutions investments. The board approved this change in the same meeting where the recommendation was made.
The SISS public equity portfolio was not transferred wholesale, with allocation decisions made prior to the transition to ensure complementarity with the CalSTRS Global Equity Portfolio. Generate, with a 11.5% exposure, is the third largest exposure in the SISS portfolio. However, neither Generation nor Schroders, which accounted for over 42% of the portfolio in 2024, were listed as exposures in the SISS portfolio in the current year.
In the CalSTRS offsite board meeting on July 8, the fund disclosed its largest asset manager exposures, including Nordea Global Stars (13.1%) and Starboard Value (12.7%) as the two largest exposures in the SISS portfolio. The changing asset manager exposure for SISS is due to the May 2025 recommendation to 'graduate' the SISS public holdings into the wider CalSTRS global equity portfolio.
CalSTRS aims to reduce emissions from its investment portfolio by 50% by 2030 and increase climate solutions allocations. The SISS and its new private markets focus are closely related to this plan. The fund is also planning to expand investments in transition assets.
This strategic shift by CalSTRS underscores a growing trend among institutional investors to prioritize climate solutions and private markets as part of their investment strategies. The NZI Annual Conference, scheduled for October 21, 2025, in London, is expected to provide insights into this trend and its implications for the global investment landscape.
- CalSTRS's strategic shift towards private markets involves an increased focus on investing in climate solutions, such as renewable energy, clean technology, and sustainable innovations, within these markets as part of its broader environmental, social, and governance (ESG) investment criteria in finance.
- As CalSTRS intensifies its climate solutions investments, the organization is likely to collaborate with specialized asset managers focused on climate solutions and sustainability-driven private investments, utilizing technology to identify and capitalize on opportunities within private markets.
