CalSTRS Commits to Sustainable Investing
The CalSTRS Teachers’ Retirement Board took a significant step toward a sustainable investment portfolio with its decision in July to commit up to $2.5 billion to low-carbon strategies.
The passive equity portfolio will be invested to match an existing index (listed as the MSCI ACWI Low-Carbon Target Index), which is designed to have significantly lower exposure to carbon emissions than the broader market and nearly complete reduction in exposure to fossil fuel reserves. Implementation will begin with U.S. equities (stocks) followed by developed markets, and finally, emerging markets.
Committing to a low-carbon index is part of a multi-faceted approach to align the portfolio with market realities emerging from climate change impacts. The board’s recent action also results in part from the December 2015 COP21 Paris climate talks and the United Nations Climate Summit in September 2014, both of which CalSTRS participated in and fully supported.
Additionally, the board approved policy changes to CalSTRS Corporate Governance Principles which establish the high-level framework for proxy voting activities and shareholder priorities. The recent changes focus primarily on climate change risk management expertise, board diversity, governance structure and composition of public company boards, as well as holding corporate directors accountable to represent and protect the interests of long-term shareholders.
Together these actions strengthen the portfolio and signal to the global investment community that CalSTRS takes our commitment to sustainability very seriously as we continue fulfilling our mission to secure the retirement future for generations of California’s educators.