Blog entry Jack Ehnes

Inclusive Engagement a Key Theme of Third Annual Sustainability Report

Within CalSTRS’ third annual Global Reporting Initiative 2015–16 Sustainability Report: Global Stewardship at Work, the theme of internal and external engagement permeates our business landscape, investment strategies and long-term drive to achieve our member-focused mission.

Striving to engage and actively seek stakeholder input is an integral and important focus of CalSTRS’ sustainability reporting efforts. This year, as in the past, we launched a stakeholder materiality survey. The results of that survey provided guidance for the topics covered in this report, including an outline of comments received from more than 400 stakeholder responses.

In an ongoing effort to improve member services, CalSTRS takes time to consider stakeholder feedback when formulating our business strategies, customer service solutions, and ongoing online and written communications. Along with an increased focus on stakeholder engagement and organizational transparency, further business solutions continue to emerge that sustain our core mission, including implementation of a new pension administration system, workforce succession planning strategies, and employee diversity and inclusion programs.

By aligning our sustainable values with those of our stakeholders—CalSTRS employees, members, beneficiaries, business partners and constituents—we actively create synergy toward achieving our mission focused on providing a secure retirement future for California’s more than 914,000 educators and their families.

In fact, this year’s report highlights a 2016 study by the UC Berkeley Center for Labor Research which clearly illustrates the dedication of our members while also affirming the value of a defined benefit pension to reward their decades of service. Researchers found that 75 percent of classroom teaching in California is performed by teachers who will have been covered by CalSTRS for at least 20 years by the time they retire. And for 86 percent of our members, the CalSTRS defined benefit pension provides a greater, more secure retirement income than an idealized 401(k)-style plan.

However, because members do not receive Social Security for their CalSTRS-covered employment, and their defined benefit pension will replace, on average, just over half of their working income, a supplemental savings plan is essential to maintain their standard of living in their retirement years. Reflecting on this data, CalSTRS recognized an opportunity to provide retirement readiness outreach by offering our members financial literacy and budget-related education. We are also targeting early career members through new technology updates for supplemental savings plans which encourage saving early in their careers when they can benefit most from the power of time and compounding.

CalSTRS’ sustainability-focused priorities are interwoven into the fabric of everything we do. Internally, our employees demonstrate their commitment every day by achieving laudable water conservation, supporting alternative transportation methods, and participating in sustainable lifestyles in our LEED Platinum-certified headquarters building.

Engaging our employees in everyday sustainable practices reduces our impact on the environment and heightens awareness. These benefits further resonate in a very powerful and impactful way through our extended communities and our actions as a large, global investor.

As a 30-year horizon investor, integrating sustainability across environmental, social and governance factors is a constant consideration for CalSTRS. Our approach to environmental, social and governance challenges embraces opportunities to expand global perspectives while incorporating innovative solutions to reach performance expectations. Managing a multi-billion dollar portfolio requires thoughtful diligence and ongoing in-depth analyses and engaged discussions to ensure a stable, risk-adjusted return profile over the long term.

Corporate Governance engagements this year with our myriad investment partners yielded tangible and meaningful results. One example included in the report details a collaborative research study amongst CalSTRS, Mercer and 17 other participants to determine how climate change may impact investments as well as actions investors could take to manage climate change risk. Through ongoing engagements and discussions that achieve global reach far beyond Wall Street, CalSTRS continues to expand the shareholder community’s knowledge of the risks and opportunities inherent in global climate change.

With the efforts detailed in our third annual 2015–16 Sustainability Report: Global Stewardship at Work, CalSTRS continues to manage resources and our fund with great diligence and care. I invite you to peruse this report and engage with it via the impactful graphics and illustrative video.

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