News release | Rebecca Forée
WEST SACRAMENTO, Calif. (April 17, 2023) – As peak proxy voting season kicks off, the California State Teachers’ Retirement System, the world’s largest educator-only pension fund with more than $300 billion in assets, is taking stronger action against corporate boards that fail to demonstrate their commitment to appropriately managing and addressing sustainable business practices. With many global companies holding their annual general meetings in the weeks ahead, a key priority for CalSTRS is enhancing its strategy to address the risks climate change poses to its global portfolio.
CalSTRS is focused on the boards of directors of the largest companies around the world and is paying particular attention to the companies emitting the highest levels of greenhouse gases.
CalSTRS expects all of its portfolio companies to provide minimum disclosures, including financial reports that align with the recommendations of the Task Force on Climate-Related Financial Disclosures and include, at a minimum, the company’s direct emissions (scope 1) and indirect emissions (scope 2). CalSTRS will vote against directors at the largest global companies that do not provide this minimum level of disclosure.
“Our job as a fiduciary and long-term investor is to make sure the companies in our portfolio are planning appropriately for the future,” said Aeisha Mastagni, a portfolio manager on CalSTRS’ Sustainable Investment and Stewardship Strategies team. “Without important disclosures, investors cannot appropriately manage risks and advance our commitments to achieving a net zero emissions portfolio.”
While the risk of climate change impacts the investment portfolio broadly, CalSTRS recognizes the emissions related to its Public Equity Portfolio are concentrated in a subset of companies.
“Two hundred and fifty companies are responsible for 75% of the emissions in our Public Equity Portfolio,” said Mastagni. “We will continue to use our influence to ensure these high emitters—in multiple sectors—minimize risks and take advantage of the opportunities available to them to be successful in a low-carbon world.”
CalSTRS’ actions are guided by its Corporate Governance Principles and commitment to a net zero investment portfolio by 2050 or sooner.
In addition to advancing its net zero portfolio emissions pledge, CalSTRS will continue its longstanding practice of evaluating the diversity of corporate boards of directors. CalSTRS believes companies with diverse leadership have better decision-making processes because people from different backgrounds bring varied perspectives and insights, which often results in positive economic outcomes.
CalSTRS also will vote against an entire board of directors that does not include at least one woman and against a board’s nominating and governance committee if at least 30% of its board members are not women. Furthermore, CalSTRS will vote against the nominating and governance committees of Russell 3000 companies that do not disclose their board members’ diversity characteristics.
Companies in the Russell 1000 Index—the largest publicly traded U.S. companies—will be held to a higher standard this proxy season. “We not only expect disclosure of the diversity of board members, we want at least one board director from each of these Russell 1000 companies to be from a typically underrepresented population,” said Mastagni.
While CalSTRS’ strategies and engagement methods vary with each company within its broadly allocated investment portfolio, the goal is always the same: to influence long-term value creation and sustainable business practices for generations to come, which in return will help ensure California’s public educators have a secure retirement.
M-F, 8 a.m. - 5 p.m. PDT
CalSTRS provides a secure retirement to more than 1 million members and beneficiaries whose CalSTRS-covered service is not eligible for Social Security participation. On average, members who retired in 2021–22 had 25 years of service and a monthly benefit of $4,809. Established in 1913, CalSTRS is the largest educator-only pension fund in the world with $307.2 billion in assets under management as of March 31, 2023. CalSTRS demonstrates its strong commitment to long-term corporate sustainability principles in its annual Sustainability Report.