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SAN FRANCISCO-The California Public Employees’ Retirement System this week adopted a plan to reduce energy usage within its 144 million-sf of core real estate holdings (retail, industrial, office). The plan could reduce energy use in the company’s $790-billion core portfolio by 20% within five years, according to CalPERS.As part of the plan, CalPERS officials will work with the company’s real estate partners to assess energy use at its buildings, pinpoint properties that would produce greater returns as a result of energy efficiency upgrades and then implement those improvements. Full implementation of CalPERS’ energy conservation measures will cost about $142 million. If fully implemented, CalPERS officials estimate that the conservation plan would save about $29 million annually in energy costs. The internal return on investment is estimated at 14% over 10 years, which means the energy efficiency upgrades would pay for themselves in five years. This investment also would create approximately 3,000 jobs and reduce energy demand by 52 megawatts, enough power to supply more than 35,000 homes, according to CalPERS officials.Earlier this month, The California State Teachers’ Retirement System made a similar commitment, setting a goal to reduce energy usage in its $4.3 billion, 57.5 million sf core real estate portfolio by 20% within five years. Both efforts stem from State Treasurer Phil Angelides’ “Green Wave” environmental investment initiative, which aims to have the pension funds produce greater financial returns. “With energy prices on the rise and no end in sight, (the two pension funds have) seized a great opportunity to reduce energy costs while protecting our environment and boosting our economy,” Angelides said. “With this action, (CalPERS and CalSTRS) set a high standard for improved energy efficiency in the whole real estate marketplace.” Earlier this year, the CalPERS board approved an allocation of $700 million for two environmental investment initiatives – a $200 million program that will invest in private equity funds and partnerships that focus on environmentally clean technologies, and a $500 million allocation for investment in public stocks of companies that produce environmentally beneficial technologies or employ business strategies that reduce damage to the environment.”Global warming is a profound development that will produce opportunities and challenges in the global marketplace,” says Rob Feckner, chair of the CalPERS Board Investment Committee. “We … intend to be smart investors by taking advantage of investment opportunities and minimizing potential risks.”To further explore environmental investment opportunities, particularly in the private equity sector, CalPERS and CalSTRS are co-sponsoring an environmental investment conference to be held March 17, 2005, in San Francisco.

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