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CalSTRS shares significant progress, next steps on net zero pledge

Aerial view of solar panels next to a tree plantation.

Nearly three years ago, the Teachers' Retirement Board pledged to achieve net zero emissions in the CalSTRS Investment Portfolio by 2050 or sooner. Staff outlined progress on the pledge at the May board meeting.

Net zero means the amount of greenhouse gases emitted by humans is offset by the amount taken away, either by natural means, such as forests, or by technology, such as carbon capture and storage. Achieving net zero can help mitigate the effects of climate change.

Investment risks associated with climate change materially impact the value of the CalSTRS Investment Portfolio, and CalSTRS continues to consider actions to mitigate risk and identify investment-related opportunities.

The net zero pledge is structured around three pillars:

  • Measuring and reducing portfolio emissions.
  • Increasing exposure to low-carbon investments that meet risk-return goals.
  • Using influence to accelerate the integration of net zero considerations across global financial markets.

CalSTRS reported progress to the board on all fronts. Major accomplishments include:

  • CalSTRS is achieving emissions reductions in several different ways. The Global Equity Portfolio reported an emissions reduction of 9.4% over the past year; Fixed Income reported a reduction of 11%.
  • Staff is measuring absolute emissions rather than using other measures, such as emissions intensity, because reducing absolute emissions is the goal of the CalSTRS net zero pledge.
  • The Sustainable Investment and Stewardship Strategies (SISS) Private Portfolio has deployed over $2 billion to date in low-carbon solutions across a broad risk-return spectrum.
  • Robust engagement continues. In addition to efforts with Climate Action 100+ (an investor-led initiative to ensure the world's largest corporate greenhouse gas emitters take necessary action on climate change), CalSTRS has identified the Priority 45, additional companies that are not part of CA 100+ where reductions in emissions can still have a significant impact. Another focus is on methane reduction. CalSTRS is calling upon eligible portfolio companies to join the Oil and Gas Methane Partnership 2.0 (OGMP 2.0), a United Nations-led framework committed to the measurement, reporting and mitigation of methane emissions. Reaching net zero is not without challenges, staff told the board. Getting accurate and consistent data remains a primary staff focus. CalSTRS will continue to call for universal reporting standards to assist with this measurement.

CalSTRS remains committed to understanding climate change and its implications not only on the portfolio but on the planet itself.

To that end, CalSTRS will continue to measure its portfolio's emissions, engage high emitters and grow exposure to low-carbon solutions.