CalSTRS revamps its SISS portfolio management, shifting focus towards private market investments
California State Teachers' Retirement System Shifts SISS Portfolio Towards Private Markets
The California State Teachers’ Retirement System (CalSTRS) has announced a significant shift in its Sustainable Investment and Stewardship Strategies (SISS) portfolio, focusing on private market investments as part of its broader net zero ambition.
In a recent meeting, the CalSTRS board voted to approve the change, following a recommendation made at the same gathering. This strategic pivot reflects the growing importance of private markets in climate-aligned investing.
The SISS portfolio is now dedicated to private markets, with a heightened emphasis on investments that address climate change risks and solutions. CalSTRS is doubling down on this approach by accounting for risks that are traditionally difficult to insure, such as physical risks from climate change and litigation risks linked to environmental accountability.
This change involves ongoing stewardship and monitoring activities, with semi-annual reports on Responsible Investment and SISS strategies, as well as progress updates on their Net Zero Strategy. The work plan highlights the continuing commitment to tracking and enhancing sustainable investment performance and stewardship, which includes private equity and real estate among focused asset classes.
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. As a result, the SISS public equity portfolio was not transferred wholesale; allocation decisions were made prior to the transition to ensure complementarity with the CalSTRS Global Equity Portfolio.
As of December 2024, 55% of the SISS portfolio's $2.83bn exposure in private markets was in infrastructure, 23% was in 'hybrid/innovative investment', and 18% was allocated to venture and growth assets. The new SISS appetite for private markets includes investing in climate solutions across a wide risk-return spectrum, from infrastructure to venture capital-like opportunities.
CalSTRS plans to deploy 1% of its overall assets, approximately $3.6 billion, into its SISS portfolio. The two largest exposures in the SISS portfolio are Nordea Global Stars (13.1%) and Starboard Value (12.7%). However, neither Generation nor Schroders, which accounted for over 42% of the portfolio in 2024, are listed in the current SISS exposures.
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 goal.
In a recent interview, CalSTRS’ Jenkinson discussed political headwinds and investing in climate solutions. The committee met again this month, and documents on the agenda show that the SISS portfolio's asset manager exposures are changing due to SISS now being dedicated to private markets.
Registration is open for the NZI Annual Conference on October 21, 2025, in London, where CalSTRS' ongoing climate stewardship efforts may be further discussed.
CalSTRS is allocating more resources to private markets, such as venture capital and infrastructure, as part of its focus on climate-aligned investing combined with technology-based solutions. This shift in the SISS portfolio aligns with CalSTRS' goal of reducing emissions by 50% by 2030 and increasing climate solutions allocations.
As CalSTRS invests in private markets, it considers risks that are difficult to insure, such as those related to climate change impacts and environmental accountability, within the broader context of climate change solutions and business opportunities.
