We believe climate change is the one of the greatest threats to our future, with undeniable links to business and financial investments. The vast impacts of climate change threaten our health and safety, our environment, and the global economy, which consequently places the CalSTRS investment portfolio at risk. Our goal is to make sure educators working today can afford to enjoy a healthy and secure retirement.
Solutions to climate change are critical to achieving this goal, but they will not happen overnight. They require a holistic approach that acknowledges both the complexity and the urgency of the global challenge. We are focused on our mission while taking an active role in addressing climate change.
We are implementing our net zero action plan and continuing to lead and align with the global movement of governments, investors, and companies who are addressing climate change.
The Teachers’ Retirement Board pledge to achieve a net zero greenhouse gas emissions portfolio by 2050, or sooner, is a holistic, enduring commitment to combat climate change. The pledge includes a four-part implementation framework:
- Pledge: Commit to achieving a net zero emissions portfolio by 2050 or sooner (action taken September 1, 2021).
- Plan: Develop a Net Zero Action Plan that establishes a baseline and milestones for managing emissions-related risks, expand investments in low-carbon solutions that meet the fund’s risk-return goals, and drive ongoing engagement with companies in our portfolio to promote a responsible net zero transition.
- Proceed: Establish actions to ensure clear internal governance structures; appropriate methodologies and frameworks to support net zero commitments; portfolio emissions measurement; and interim goals.
- Publish: Provide and encourage regular reporting on progress toward net zero goals.
We are not waiting. We are taking steps now to reduce emissions from our portfolio in both the short and long term. In the short-term, we are preparing for success, engaging companies to reduce greenhouse gas emissions, expanding government policies and investing in climate solutions:
Preparing for success through:
- Determining a baseline of current portfolio emissions and milestones to reduce emissions in alignment with global targets.
- Developing clear internal structures to guide decision-making.
- Providing regular updates to our audiences.
In the first half of 2022, staff established baselines that identified:
- The amount of greenhouse gas emitted from the companies we invest in.
- Standards we encourage corporations to use when disclosing their alignment with a net zero economy.
In the second half of 2022, staff will develop recommendations to:
- Reduce portfolio emissions in a phased manner over time.
- Escalate corporate and policy-related engagement activities.
- Define low-carbon investments and opportunities to increase investments that meet our risk-return goals.
Engaging companies to reduce their emissions by working independently and in coalitions, while using all available engagement tools.
Engaging companies in our portfolio takes greenhouse gases out of the air by obtaining commitments from companies to reduce emissions. We are a leading participant in Climate Action 100+, an initiative of more than 600 investors working with the companies they invest in to reduce emissions.
- Since Climate Action 100+ launched, 111 companies have made commitments to reduce emissions. Combined, those commitments make up more than a quarter of the greenhouse gases emitted today.
- Climate Action 100+ signatories passed 15 climate-related shareholder proposals in 2021, more than double the number in 2020.
- As part of our role in Climate Action 100+, we have secured emissions reduction commitments from all eight CalSTRS-led company engagements.
Duke Energy committed to net zero emissions by 2050. Duke is providing cleaner energy to customers, shifting to lower- and no-carbon sources, maintaining reliability and charging rates below the national averages. Duke also made the following commitments:
- Phase out of coal.
- Retire several older oil and natural gas generation units.
- Achieve net zero methane emissions by 2030 for its natural gas companies.
Southern Company committed to net zero emissions by 2050. It has also designated 2028 as a target for retiring more than half of its remaining coal-fired power generation fleet.
Phillips 66 committed to a 30% reduction in emissions that come from its own operations and those that come from generating the energy it needs. It also agreed to a 15% reduction in emissions from the products it sells. Additionally:
- In October 2021, it released a lobbying activity report showing how the company’s policy goals align with the Paris Agreement and explaining its emerging focus on renewable fuels, batteries, carbon capture and hydrogen. The report was a direct result of a CalSTRS-led shareholder proposal and public campaign.
- In September 2021, it became the first U.S.-based oil refiner to commit to lowering emissions that come largely from the burning of the oil, natural gas and other fuels it sells. Phillips 66 committed to reducing these emissions 15% below 2019 levels by 2030. This was in response to a shareholder proposal that we supported and was passed.
Nippon Steel committed to becoming carbon neutral by 2050. Its 2050 carbon neutral climate goal leverages Nippon Steel’s energy efficiency methods. By 2030, the company plans to introduce a mix of hydrogen into its steel making process, reducing the use of coal. By 2040, the plan calls for a 100% hydrogen mix that eliminates carbon emissions in the production of steel.
ENEOS committed to net zero by 2040. Its transition plan includes strategies for renewable energy, CO2-free hydrogen production and distribution, and infrastructure to support an electric vehicle charging network across Japan. The company also sold its interests in foreign coal mining operations.
In 2020, ENEOS reduced its CO2 emissions by 3.14 million tons.
Dominion Energy committed to net zero by 2050. The Dominion Energy Integrated Resource Plan 2021 Update describes a plan that retires almost all its coal generating units by 2030.
Daikin Industries committed to net zero by 2050. The short-term strategy known as Fusion 25 calls for lowering emissions throughout the life cycle of its products by 50% or more by 2030. The plan also focuses on reducing energy usage.
Toray Industries has committed to a 30% reduction in greenhouse gas emissions. The company outlines its plans through its vision 2030 plan.
As part of Climate Action 100+, CalSTRS staff will evaluate each company’s progress through the initiative’s annual benchmark scoring update, which was released March 2022.
ExxonMobil: Though not one of our Climate Action 100+ focus companies, we supported a monumental campaign that resulted in the election of three candidates nominated by Engine No. 1 to the ExxonMobil board. In January 2022, Exxon Mobil announced a net zero by 2050 pledge from its scope 1 and scope 2 emissions.
The company plans to meet this goal by focusing on energy efficiency measures, reducing methane leaks, upgrading equipment, and eliminating the venting and routine flaring of natural gas. While the announcement is a step in the right direction, the plan does not address scope 3 emissions, or those generated from consumer use of Exxon products. Scope 3 emissions make up a significantly larger portion of emissions linked to the company.
Expanding government policies by working independently and in coalitions to shape laws and regulations at the state, national and international levels that will speed up reductions in emissions. This advocacy includes writing letters, testifying in government hearings and speaking publicly.
Methane emissions, the most potent greenhouse gas, will be more tightly regulated. The Environmental Protection Agency proposed updates to the Clean Air Act to reduce methane emissions from the oil and natural gas industry. This proposed rule would reduce 41 million tons of methane emissions from 2023 to 2035, more than the amount of carbon dioxide emitted from all U.S. passenger cars and commercial aircrafts in 2019.
Companies will be required to provide better climate-related disclosure to investors. We supported the mandated climate disclosures and an SEC requirement for companies of all sizes, and in all industries, to disclose both direct and indirect emissions.
Oversight of U.S. financial stability now includes climate change. We supported a federal bill that establishes a climate risk advisory committee at the Financial Stability Oversight Council. The FSOC is significant because it provides comprehensive monitoring of the stability of our nation’s financial system.
Investing in solutions by investing in companies that provide returns while reducing emissions in a variety of ways, such as producing renewable energy or constructing and managing buildings that meet the highest standards for energy and water efficiency.
Since 2004, CalSTRS has actively integrated climate-oriented solutions into our portfolio. As more of our asset classes found investment opportunities, we accelerated this integration and have invested more than $20 billion in low-carbon solutions. Examples of these investments include:
- $294 million: Green bonds in the Fixed Income Portfolio, as of October 31, 2021.
- $14.2 billion: LEED-certified buildings in the Real Estate Portfolio, as of June 30, 2021.
- $4.2 billion: Dedicated low-carbon strategies in the Public Equities Portfolio, as of October 31, 2021.
- $1.4 billion: Renewable power, agriculture, timberland and LEED certified structure investments in the Inflation Sensitive Portfolio, as of June 30, 2021.
- $1 billion: BlackRock low-carbon transition readiness exchange-traded funds, as of October 31, 2021.
- See how CalSTRS is fulfilling its mission while adressing climate change.
- Get the latest update on the development of our Sustainable Investment and Stewardship Strategies’ Private Assets Portfolio.
- CalSTRS activist stewardship is targeted and heightened engagement at a company where traditional engagement has failed to produce meaningful results.
- Understand how CalSTRS is investing for the future in our annual Green Initiative Task Force Report.
- Familiarize yourself with CalSTRS’ engagement activities over the last quarter.
- See CalSTRS’ investment policy for addressing environmental, social and governance risks in our investments.
- View CalSTRS’ investment beliefs that provide a foundational framework for investment decisions.
- Read CalSTRS’ joint statement on the importance of long-term, sustainable growth, and other ESG letters and statements.
CalSTRS is part of global coalitions seeking improved disclosure and action to address climate risk. CalSTRS is actively involved with:
- Climate Action 100+, a global investor initiative to ensure the world’s largest corporate gas emitters take necessary action on climate change.
- The Task Force on Climate-Related Financial Disclosures, a framework that enables consistent climate-related risk disclosures by companies.
- The Sustainability Accounting Standards Board, that is establishing disclosure standards across material environmental, social and governance topics.