Low-Carbon Economy

Transition to a low-carbon economy

Overview

CalSTRS recognizes that climate change presents a material and existential risk to society and the economy. We are committed to influencing public policies, engaging with companies and promoting an orderly transition to a low-carbon economy through investments.

Our Low-Carbon Transition Work Plan seeks to reduce climate-related risk and identify opportunities to invest in climate-related solutions while also benefiting our members—California’s public school educators. 

The work plan includes five objectives:

  1. Build board and staff consensus on portfolio impacts. 
  2. Evaluate the transition readiness of portfolios by asset class.
  3. Expand investments in new climate-related solutions. 
  4. Enhance stewardship activities. 
  5. Communicate strategies.
Post

Low-Carbon Transition Work Plan highlights

Net zero pledge

On September 1, 2021, the Teachers’ Retirement Board (TRB) committed to achieving net-zero greenhouse gas emissions across its investment portfolio by 2050 or sooner, aligning with the science-based targets of the Paris Agreement. The TRB also approved a four-part implementation framework to chart its path to net zero, consistent with the United Nations’ Race to Zero campaign, the largest global effort to address climate change:

  1. Pledge: Commit to net zero investment portfolio by 2050 (action taken September 1, 2021);
  2. Plan: Develop a Net Zero Action Plan that will establish a baseline and milestones for managing emissions-related risks; expand investments in low-carbon solutions; and drive ongoing engagement with companies in the CalSTRS portfolio to promote a responsible net zero transition;
  3. Proceed: Establish actions for the next year to ensure clear internal governance structures; appropriate methodologies and frameworks to support net zero commitments; portfolio emissions measurement; and interim goals; and
  4. Publish: Provide and encourage regular reporting on progress toward net zero investments.

Watch how CalSTRS commits to net zero.

New ways we’re investing

  • Low-carbon exchange traded fund (April 2021) – We invested $1 billion into a BlackRock Transition Readiness Exchange-Traded Fund (ETF) that meets our risk-return goals and helps us better understand how companies in the CalSTRS Investment Portfolio are positioned for the low-carbon transition.
  • Expanding our portfolio (March 2021) – The Sustainable Investment and Stewardship Strategies team is expanding our sustainable and low-carbon investments to our private asset classes. Over the next few years, we anticipate investing $1 billion to $2 billion into private markets, initially focusing on affordable housing opportunities, and then low-carbon solutions relating to energy, technology-enabled resource efficiency, water and waste management, land and agriculture management, and food security.

Recent wins in company engagement

  • Activist stewardship (June 2021) – After a monumental and months long campaign, three candidates nominated by Engine No. 1 and supported by CalSTRS, were elected by shareholders to the ExxonMobil board. This historic vote represents a tipping point for companies unprepared for the global energy transition. Read CalSTRS statement on this development.
  • Shareholder proposals (May 2021) – On May 12, 2021, a majority of Phillips 66 shareholders voted to pass the proposal submitted by CalSTRS asking the company to address concerns regarding corporate lobbying activities that are inconsistent with the Paris Agreement. Read more about why this proxy season is a record breaker for climate proposals in an article by Mindy Lubber, CEO and president of Ceres, a sustainability nonprofit organization.
  • Collaborative engagements (Multiyear effort) – Through the Climate Action 100+ engagement initiative, we secured significant emission reduction commitments with the eight corporate engagements that we lead:
     
    Commitment Company Industry Region
    Net-zero emissions by 2040 ENEOS Oil and gas refining Japan
    Net-zero emissions by 2050 Duke Energy Electric utilities U.S.
    Net-zero emissions by 2050 Southern Company Electric utilities U.S.
    Net-zero emissions by 2050 Dominion Energy Diversified utilities U.S.
    Net-zero emissions by 2050 Daikin Industries A/C manufacturing Japan
    30% emissions reduction by 2030 Nippon Steel Steel manufacturing Japan
    30% reduction in GHG emissions intensity Toray Industries Textile manufacturing Japan
    Pending Phillips 66* Oil and gas refining U.S.


    *At the latest company annual general meeting in May 2021, shareholders approved two proposals: (1) asking the company to set emission reduction targets, (2) requesting the company issue a report on whether its lobbying activities are consistent with the goals of the Paris Climate Agreement.
Video

The value of engagement

The value of engagement

As a long-term investor, CalSTRS engages companies to align their policies and business practices with the changing world around us. This short, animated video explains how engagement improves corporate sustainability and creates long-term value for CalSTRS members.

Post

Resources