In May, we led the release of an investor statement highlighting the importance of Climate Action 100+ and the value of collaborative engagements as a risk mitigating tool. The statement was signed by 47 fellow institutional investors, who, with CalSTRS, collectively represent $4.6 trillion in assets under management. Climate Action 100+ focuses on engaging the world’s largest corporate greenhouse gas emitters to take necessary action on climate change to promote sustainable and resilient business practices. First launched in 2017, the coalition focuses on influencing companies to improve governance of climate risks, set emission reduction goals, establish low-carbon transition plans and enhance climate-related risk disclosure.

Climate Action 100+ has seen significant progress at focus companies:

• 77% of companies now commit to net zero by 2050 or sooner across emissions for direct operations.
• 93% of companies have board committee oversight of climate risks and opportunities.
• 90% of companies explicitly commit to aligning their disclosures with the Task Force on Climate-Related Financial Disclosure framework.

Virtually all companies—and thus investors—are affected by climate risk and the transition to a net zero emissions economy. Managing climate-related risk therefore requires action by a coalition of the world’s governments, businesses, investors and communities. Collective engagements such as Climate Action 100+ allow like-minded investors to more effectively allocate resources and amplify their influence to manage risk and protect the investments that provide security for our beneficiaries.

Engaging Weis Markets for better governance

Weis Markets is a U.S. mid-Atlantic food retailer with more than 200 store locations. We’ve engaged this company for several years due to its lack of board diversity and lack of gender, ethnically or racially diverse directors. The board also lacks a nominating committee (a body dedicated to identifying high-quality directors to serve on the board), a basic corporate governance best practice and is highly unresponsive to shareholders.

This year, in an escalation to our engagement efforts, we filed an exempt solicitation with the Securities and Exchange Commission. An exempt solicitation is a regulatory filing that allows us to communicate broadly with other shareholders, announcing our decision to vote against the board members of Weis Markets while providing our rationale. After our exempt solicitation, prominent proxy advisory firms Glass Lewis and ISS noted many of the same concerns we identified and recommended their clients, other investors, also vote against board members.

In the final vote, all directors were re-elected due to significant company insider ownership. However, support from non-insiders (shareholders not directly affiliated with the company) was low, with some board members receiving less than 40%. We think this result will send a strong message to the company about investor dissatisfaction and will bolster our engagement with the company to improve its board composition and governance practices.

Federal Trade Commission issues noncompete agreement rule

In April, the Federal Trade Commission announced a final rule that would ban the use of noncompete agreements nationwide. We wrote the commission expressing support for the creation of such a rule. Our letter outlined many concerns with the use of noncompete agreements as they can potentially stifle innovation and depress wages by limiting the ability of workers to freely move from one firm to another. Efficiently functioning labor markets lead to a thriving and competitive economy, which is beneficial to us and other long-term investors. Banning noncompete agreements also reduces reputational and legal risks for companies, as these types of agreements were already enforced in a highly inconsistent manner across different jurisdictions.

Southern Company increases carbon-free nuclear power output

In 2019, when we began our Climate Action 100+ engagement with Southern Company, the goal was for the utility company to establish a plan to transition to net zero emissions by 2050. In April 2024, the company hit a key milestone on its journey when Vogtle Unit 4 at the Alvin W. Vogtle Electric Generating Plant began commercial operation. Vogtle Unit 4, along with Vogtle Unit 3, are part of an 11-year construction project that is now producing carbon-free electricity to more than 1 million homes and businesses in Georgia.

The massive Vogtle complex consists of four nuclear units. Vogtle Unit 3 entered commercial operation in summer 2023, Vogtle Unit 4 followed in April 2024, and Vogtle Units 1 and 2 were built in the 1980s. The newer nuclear plants are part of a broader plan to decarbonize Southern Company’s operations by reducing the number of coal-fired energy producing units. Since 2007, the company has retired more than 50 coal units with some sites transitioning to cleaner-burning natural gas. These efforts have reduced the company’s carbon emissions by 46%. Additionally, Vogtle Units 3 and 4 support a just transition with 800 permanent, high-paying positions.

Southern Company lists safety and emergency planning as the top priority at Vogtle. This includes protecting the health and safety of the company’s employees, the public and the environment. The Vogtle plant is designed with redundant safety systems and multiple layers of protection to ensure safe operation. Full-time, on-site inspectors monitor the plant to ensure it is maintained and operated in accordance with established nuclear operating procedures. In the unlikely event of an emergency, Vogtle has comprehensive plans intended to safeguard personnel, property and the public. These plans are tested and updated regularly.

Nuclear plants are key to carbon-free baseload (a minimum level of electricity needed to sustain a grid) electricity generation because they produce energy 24 hours a day, while other carbon-free energy sources such as wind and solar do not. Additionally, nuclear-generating assets are more resilient than coal or gas, requiring less downtime for maintenance. U.S. nuclear power reactors accounted for nearly 19% of domestic electricity production in 2023, making nuclear the second-largest source of U.S. electricity generation, after natural gas.