Joseph Dear is chief investment officer of California Public Employees’ Retirement System, the big public pension fund. According to Mr. Dear, a Calpers fund devoted to clean energy and technology which started in 2007 with $460 million has an annualized return of minus 9.7% to date. Here are excerpts of his remarks on Calpers’ experience
We have almost $900 million in investment expressly aimed at clean tech. We’re all familiar with the J-curve in private equity. Well, for Calpers, clean-tech investing has got an L-curve for “lose.” Our experience is this has been a noble way to lose money. And we’re not here to lose money.
One of the things that an institutional investor like Calpers can do is take an illiquidity risk and get paid for it. But if it takes 12 years to get the money out, the internal rate of return is not going to be very good, even if the investment is reasonably successful.
What’s going to make these markets really take off is if the price of alternative energy drops below the price of a carbon-energy equivalent. You will no longer need incentives or anything else.
If that’s not going to happen, somebody has to step in and either raise the price of carbon or lower the cost of the alternatives.