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Holding companies accountable on climate

Pension Sense blog | April 22, 2022

Earth from space with sun on horizon

It is said that during spaceflight, when an astronaut first looks back to gaze upon our planet they experience what is called the “overview effect”—an overwhelming cognitive shift in awareness of one's place in the universe and the fragility of life on Earth. In an instant, this reality can reshape one’s worldview, bringing our natural environment into focus, melting away national borders, and sharing in the triumph of the human spirit. At CalSTRS, we recognize our small but meaningful place in the universe and the reason for our existence.

CalSTRS’ purpose is to uphold our century-long promise to California’s hard working public educators who have dedicated their careers to inspiring those around them. Our responsibility to our members is what compelled us to broaden our sense of global stewardship back in 2004 and respond to climate-related risks posed to the CalSTRS Investment Portfolio. Reducing greenhouse gas emissions in our portfolio is critical for the long-term health of our pension system and our planet, so we integrate environmental, social and governance principles into our investments and are aligned with the United Nations’ Race to Zero campaign and the goals laid out in the Paris Agreement on climate change.

Climate change is one of the greatest threats to our future—impacting the planetary environment, worldwide economy, and the health and safety of us all. As part of our ongoing efforts to achieve our mission, we have been demonstrating on the world stage our efforts to influence the global transition to a low-carbon economy:

  • In 2006, we established a climate change stewardship program to impact company practices.
  • In 2007, we published our first Green Initiative Task Force Report.
  • In 2015, we signed onto the Paris Action Pledge.
  • In 2016, we committed to investing up to $2.5 billion in a low-carbon index strategy, which has a significantly lower emissions profile than the underlying benchmark.
  • In 2018, we joined the “Climate Action 100+” investor-led initiative to ensure the world’s most significant corporate carbon emitters take necessary action on climate change.
  • In 2021, we stepped up our engagement to support a campaign to replace three ExxonMobil board directors who were impeding our portfolio’s climate goals during a historic board election. We also initiated a low-carbon transition readiness strategy for our portfolio and, perhaps most consequentially, pledged to achieve net zero greenhouse gas emissions within our portfolio by 2050 or sooner.

The price of inaction is measurable. That is why we are implementing a more robust approach to corporate engagement in 2022, ensuring corporate directors are held accountable for creating long-term value and managing long-term risks. We are leveraging our unique position as shareholders during what is known as “proxy season” to oppose the election of directors in companies who have moved too slowly to achieve greater board diversity or significantly address climate change. We expect all companies to manage climate change risks by publishing a report that discloses at a minimum their direct and indirect emissions.

In addition to casting our proxy votes against companies with directors who do not disclose emissions, we will vote for shareholder proposals that demand meaningful net zero actions, such as comprehensive public reports or the setting of appropriate, science-driven targets to reduce emissions by companies in our portfolio. We are sending a message that corporate directors must meet high standards in the critical areas of board diversity and climate change, and we will support a change in leadership to meet these standards.

As individuals we can sometimes feel small in the face of seemingly insurmountable odds, much like what astronauts feel when witnessing the awe of our tiny blue marble from the depths of space. Working together with conviction and purpose, and investing smartly, we are confident we will continue to secure the financial future of California’s public educators and their beneficiaries, while also supporting tangible progress on climate change—today on Earth Day, and every day going forward. For more information on our net zero pledge and a video about our approach, please visit Path to net zero