CalPERS Fossil-Fuel Private Equity: Time for a Scorecard

A new analysis of private equity oil-and-gas funds raises an important question for CalPERS: What has the pension system actually earned from CalPERS fossil-fuel private equity investments after fees, inflation, illiquidity, and risk?

As many readers know, I am a retired California State employee, sometimes actively engaged with CalPERS, which provides my pension, and with CSR and RPEA, which both represent the interests of retiree-members as stakeholders with CalPERS. I recently wrote to the CalPERS Board of Administration asking it to answer that question by developing a CalPERS Fossil-Fuel Private Equity Scorecard. Request for a CalPERS Fossil-Fuel Private Equity Scorecard

My request was prompted by the recently released 2026 Private Equity Climate Risks Scorecard & Report, produced by the Private Equity Stakeholder Project, Americans for Financial Reform Education Fund, and Global Energy Monitor. I had also recently written that more transparency was needed at Harvard’s Endowment and concluded that CalPERS might benefit from greater transparency. (see Conversion: Harvard’s Endowment Shows Why Fossil‑Free Is Only the Beginning)

Count What Came Back – and Music for a Democratic Corporate Governance

CalPERS Oil-and-Gas Private Equity: Barely Breaking Even?

The Private Equity Climate Risks report examines 20 major private equity firms with substantial fossil-fuel infrastructure holdings. Collectively, the firms manage approximately $7.3 trillion and back at least 244 energy companies owning or operating more than 1,050 fossil-fuel assets.

The environmental implications are substantial. The report estimates that those energy portfolios generate approximately 1.5 gigatons of greenhouse gas emissions annually.

For CalPERS beneficiaries, however, one of the report’s most important findings may be financial.

Researchers examined 145 dedicated private equity oil-and-gas funds that had largely completed their investment lifecycles. Investors contributed approximately $190.4 billion and received approximately $192.9 billion back.

The median fund returned only about 2% more than investors contributed over its entire investment life. After adjustment for inflation, investors lost money on average.

See the Private Equity Stakeholder Project’s discussion of the findings.

That does not mean every fossil-fuel private equity investment performed poorly. Nor does the report establish how CalPERS’ own fossil-fuel investments performed in aggregate. That is exactly why CalPERS should conduct its own analysis.

What Do CalPERS’ Own Numbers Show?

CalPERS already publishes considerable information about its active private equity partnerships through its Private Equity Program Fund Performance Review.

Selected energy-focused partnerships illustrate considerable variation:

Source: CalPERS Private Equity Program Fund Performance Review, publicly disclosed performance as of December 31, 2025. CalPERS defines Cash In as capital contributed for investments and management fees; Cash Out as distributions received; and Cash Out + Remaining Value as distributions plus the reported value of invested capital.

The examples make an important point. The question should not be reduced to whether fossil-fuel investments are categorically “good” or “bad.” Some CalPERS energy funds have performed reasonably well. Others have produced negative or near-zero returns.

The appropriate fiduciary question is more demanding:

Have CalPERS’ fossil-fuel private equity investments, taken as a group, adequately compensated beneficiaries for their fees, illiquidity, concentration, valuation uncertainty, climate-transition exposure, and other risks relative to reasonable alternatives?

CalPERS Oil-and-Gas Private Equity: Current Disclosure Cannot Answer That Question

There is an important limitation to the information CalPERS currently makes available.

Its public private-equity performance table covers active partnership investments. It does not include partnerships CalPERS has already exited.

That makes it impossible for beneficiaries or the Board to use the public table alone to evaluate CalPERS’ complete historical experience with fossil-fuel private equity.

That limitation is particularly important when evaluating private equity because funds commonly last a decade or longer. Looking only at investments that remain active can create a very different picture from examining complete investment lifecycles.

CalPERS Oil-and-Gas Private Equity: What a Scorecard Should Include

I have asked the Board to direct staff to prepare and periodically update a scorecard covering both active and exited fossil-fuel private equity investments.

For each fossil-fuel-focused or materially fossil-fuel-exposed investment, the scorecard should disclose, where available:

• fund and manager;
• vintage year;
• CalPERS commitment;
• capital contributions;
• management fees and other expenses;
• distributions;
• remaining value;
• carried interest;
• net internal rate of return;
• net investment multiple;
• realized versus unrealized returns;
• inflation-adjusted returns;
• appropriate public-market equivalents and other benchmarks; and
• performance relative to CalPERS’ broader private equity portfolio.

The analysis should also identify CalPERS’ exposure to fossil-fuel assets through these partnerships and assess material transition risk, stranded-asset risk, regulatory risk, insurance risk, and physical climate risk.

Those considerations should not substitute for financial analysis. They should be incorporated into it.

This Is Not a Request to Prejudge the Answer

I am not asking the CalPERS Board to assume that all fossil-fuel private equity investments have been poor investments. Nor am I asking the Board to adopt a divestment policy based on the Private Equity Climate Risks report.

I am asking CalPERS to test the report’s findings against its own investment history.

CalPERS is in a far better position to perform that analysis than outside researchers. It has access to capital-account statements, partnership agreements, cash flows, fee and expense information, manager reports, portfolio-company information, and decades of investment records.

If CalPERS’ fossil-fuel private equity investments have provided attractive risk-adjusted returns, a scorecard should demonstrate that.

If they have underperformed after fees, inflation, illiquidity, and risk are taken into account, beneficiaries and the Board should know that as well.

And if performance varies substantially by manager, strategy, or vintage, identifying those differences could help CalPERS make better investment decisions going forward.

CalPERS Oil-and-Gas Private Equity Scorecard Timely Under Total Portfolio Appoach

The request is particularly timely as CalPERS moves toward evaluating investments according to their contribution to the total portfolio, rather than viewing individual asset classes largely in isolation.

That should make opportunity cost increasingly important. Fossil-fuel private equity should not be evaluated merely on whether a fund eventually returned more dollars than were invested. The relevant comparison is what CalPERS earned relative to other opportunities available over the same period, for the risks, fees, and illiquidity it accepted.

A nominal gain accumulated over ten or fifteen years can still represent a loss of purchasing power. A positive return can also be inadequate if substantially better returns were available elsewhere at lower cost or with less risk.

The Question CalPERS Should Answer

What has CalPERS actually earned from its fossil-fuel private equity investments, after all costs and over complete investment lifecycles, and has that return adequately compensated the System for the risks assumed?

The Private Equity Climate Risks report provides a reason to ask the question. CalPERS’ own records can provide a much better answer.

I have asked the Board to direct staff to develop a CalPERS Fossil-Fuel Private Equity Scorecard and make the results available to Board members, beneficiaries, and the public.

Better disclosure would allow the discussion to move beyond assumptions about fossil fuels—whether positive or negative—and toward something CalPERS should be exceptionally well positioned to provide: evidence about what these investments have actually delivered for beneficiaries.\

Sources and Further Reading for CalPERS Oil-and-Gas Private Equity Scorecard

• • 2026 Private Equity Climate Risks Scorecard & Report
  • Private Equity Stakeholder Project: 2026 PECR Scorecard and oil-and-gas fund performance findings
  • CalPERS Private Equity Program Fund Performance Review

Collaborate with CorpGov.net on Social Media (or Leave Comments at the bottom)

Linkedin
BlueSky
Facebook
Mastodon
Substack
X (formerly Twitter)

Related Posts