At its January 2024 meeting, the Teachers' Retirement Board’s Investment Committee approved changes to the CalSTRS Corporate Governance Principles and Stewardship Priorities for the next three-year cycle.

The updated Corporate Governance Principles incorporate changes in four areas:

• Standardized global sustainability disclosure standards.
• Boards of directors' responsibilities, including employee wellness factors, such as workforce diversity, pay, benefits, hiring, retention and business culture.
• Environmental, social and governance (ESG) metrics in executive compensation.
• ESG risks and opportunities.

The new principles recommended by CalSTRS staff were based on research that included reviewing principles and policies at global peers. The changes align CalSTRS with current best practices across the institutional investment industry.

These principles provide a framework for proxy voting activities at CalSTRS. During proxy voting, CalSTRS votes at shareholder meetings of more than 9,000 companies in the investment portfolio on issues including the election of board members or whether to approve proposals meant to hold companies accountable for failing to address climate change risks.

Proxy voting is a fiduciary duty, meaning CalSTRS must act in a way that will benefit members and beneficiaries. CalSTRS believes this is an important shareholder right. Following these principles allows CalSTRS to consistently exercise that right.

The Stewardship Priorities lay the foundation for corporate engagements and market-wide efforts to mitigate potential risks to the portfolio. These priorities are designed so staff can use the influence CalSTRS has as a significant global investor to promote sustainable business practices and public policies that drive long-term financial success on behalf of California’s public educators.

The revised priorities include three key areas and help guide how CalSTRS prioritizes specific engagement issues:

• Corporate and market accountability
• Net zero transition
• Workforce and communities

For more information go to the CalSTRS Stewardship page.