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SAN FRANCISCO-The California Public Employees’ Retirement System said Monday it has made progress toward its environmental goals for its real estate holdings. While it’s too early to know if the company’s ‘green’ initiative will positively affect investment returns, the nation’s largest public pension fund said energy use by its real estate partners has gone down, including a 13.3% reduction in 2007.

The data was part of a report to CalPERS’ investment committee that summarized all of the pension fund’s environmental initiatives, which cover not only real estate but also private equity, public companies and inflation-linked asset groups. “This assessment shows initial signs of real progress,” said George Diehr, Chair of the Investment Committee.

Compared with 2006, the CalPERS Energy Efficiency Plan showed the reduction in electricity and natural gas based on its core investment partners’ response to a survey. CalPERS’ environmental plan was set up in 2005 and is designed to reduce energy use by 20% by 2009, while also achieving risk-adjusted returns.

CalPERS says its partners adopted such conservation measures as the installation of low-flow or sensor-operated fixtures, recycling programs, and mitigating and treating storm water runoff. One partner, the Hines Green Development fund, created in 2006 with CalPERS’ $225-million equity commitment, now has about $725 million in gross assets for development projects that involve high performance sustainable office buildings.

CalPERS is the nation’s largest public pension fund with more than $175 billion in market assets. As of September 30, 2008, five CalPERS Global Equity Partners had $419.7 million under management for environmentally screened public equity funds. CalPERS says it plans to expand the program for investments with managers who target public companies that are adapting to or mitigating climate change and other environmental risks.

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