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CalSTRS’ board commits to additional investment actions to address climate change and protect pensions

Pension Sense blog | October 20, 2022 | Barbara Zumwalt

Stack of coins with leaves growing out of them and an earth icon

The Teachers’ Retirement Board, which governs the California State Teachers’ Retirement System, took an important step to support your retirement security at its August 2022 meeting.

The board authorized a package of investment actions intended to help protect the CalSTRS Investment Portfolio from the negative effects of climate change.

Why did the board authorize these changes?

Because the science is clear: To ensure the future of our planet and communities, the economy must move toward net zero emissions. Scientists agree it’s the best way we can tackle climate change.

What does net zero mean?

Imagine a bucket full of grain with a hole in the bottom. A spigot releases grain into the bucket and it’s always open, so there is always grain spilling into the bucket. Because of the hole, some grain escapes. We need the grain to stay at the same level all the time—we don’t want the bucket to overflow and we don’t want too much grain to escape through the hole, leaving the bucket empty. So, we adjust the spigot until the amount of grain entering the bucket equals the rate at which the grain falls out of the hole, this way the grain remains at the same level in the bucket. This is what is considered a “net zero” amount. We managed to adjust the input of grain so it does not fill the bucket at a rate higher than the rate it falls through the hole.

The emissions we’re trying to avoid increasing are primarily greenhouse gases, which are gases in the earth’s atmosphere that trap heat, leading to warmer temperatures and more severe, destructive and costly weather events (also known as climate change). The gases are like the walls of a greenhouse that hold warmer temperatures inside (this is what inspired the term greenhouse gases).

Greenhouse gases are caused by human activities, such as driving gasoline-powered cars, and we try to balance the quantity of these gases by the amount we take away until we accomplish a “net zero” amount of greenhouse gases. This is accomplished in a few ways, and two key methods of balancing the gases are by:

  • Natural means, such as forest conservation and restoration, as trees can absorb more carbon dioxide (one of the greenhouse gases) from the atmosphere than they release into the atmosphere.
  • Technology that captures greenhouse gas emissions from industrial processes, like steel and cement production or from burning fossil fuels for power and electricity generation. Once captured, the greenhouse gases can be transported from where they were produced, via ship or a pipeline, and stored deep underground.

At CalSTRS, one of our significant new goals is to do our best to reduce investments linked to greenhouse gas emissions across our investment portfolio by 50% by 2030. This will help us meet our ultimate goal, which the board set last summer, of having a 100% net zero portfolio by 2050 or sooner. These goals are consistent with the latest scientific findings of the United Nations’ Intergovernmental Panel on Climate Change.

When natural disasters interfere with businesses and the economy, companies and investors, such as CalSTRS, generally lose money. No sector of the world’s economy is immune to the impacts of climate change, which is why all companies must take steps to address it.

We carefully consider all potential risks to the CalSTRS Investment Portfolio that could affect the security of your pension. Since 2004, we have been proactively investing in climate-oriented solutions and integrating climate-risk considerations into our investment activities.

To learn more about our recent net zero investment actions and our major milestones so far, see our “Fulfilling our mission while addressing climate change” infographic. Also watch our new video explaining our path to net zero and how we plan to build on our long history of climate change management. These steps will help us secure our promise to provide you with a secure retirement while also supporting the global movement to invest in climate change solutions.

For information on how to reach CalSTRS, visit the contact us webpage.