Low-Carbon Transition Work Plan accomplishments
(as of June 2021)

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CalSTRS has a long history of managing climate risk within the CalSTRS Investment Portfolio. Climate-related risks are determined by assessing possible impacts of climate change, such as extreme temperature changes leading to severe droughts or floods. These climate risks can have a lasting negative effect on the economy and our investment strategies.

In 2019, we developed the Low-Carbon Transition Work Plan to guide us as we transition our portfolio toward a low-carbon economy. A low-carbon, low-fossil-fuel, and decarbonized economy are some of the terms used to describe an economy based on low-carbon power sources that have a minimal output of greenhouse gas emissions into the atmosphere, specifically carbon dioxide. Our three work plan priorities are:

  1. Establish a low-carbon investment belief.
  2. Assess transition readiness across asset classes.
  3. Expand investments in low-carbon solutions.

To support these priorities, we identified five objectives to enhance our stewardship activities and communication strategies.

Objective 1: Build board and staff consensus on the portfolio impacts

Why is this important?

To establish a common understanding of investment risk related to climate change, among the Teachers’ Retirement Board and CalSTRS staff.

Progress update

In 2019, we began hosting educational sessions for the Teachers’ Retirement Board on the global low-carbon transition. The series includes presentations from a diverse range of climate change thought leaders and experts.

In January 2020, the Teachers’ Retirement Board approved a new low-carbon investment belief. CalSTRS’ investment beliefs provide a foundational framework for all our investment decision-makers, and represent our view of, and vision for participating in, the global investment markets to meet our fiduciary goal.

Objective 2: Evaluate the transition readiness of portfolios by asset class

Why is this important?

To understand how low-carbon-related risks can impact investments within our portfolio. Climate-related data is rapidly evolving, and the initial analysis of our Real Estate and Public Equity portfolios will help us determine how well-positioned our investment portfolio is for the global low-carbon transition and inform ongoing investment decisions.

Progress update

Real Estate

We are evaluating the portfolio for physical climate risks—temperature, precipitation, sea-level rise, floods, hurricanes and wildfires—that will have the most critical economic impacts on real assets.

Public Equity

Since 2017, we have invested in low-carbon index strategies. We recently funded an innovative $1 billion low-carbon transition readiness equity strategy, and as of May 31, 2021, the CalSTRS Low-Carbon Index totaled $3.8 billion.

Objective 3: Expand investments in new climate-related solutions

Why is this important?

To deploy capital into investments that meet the risk-return goals of the total fund and accelerate the low-carbon transition.

Progress update

We are creating a platform to further expand sustainable investment opportunities in private equity, infrastructure and real estate. Over the next few years, we anticipate investing $1 billion to $2 billion into private markets.

We will initially focus on affordable housing opportunities and low-carbon solutions related to energy, technology-enabled resource efficiency, water and waste management, land and agriculture management, and food security.

Objective 4: Enhance stewardship activities

Why is this important?

To be a long-term, active owner and steward of capital who engages hundreds of companies each year to promote sustainable business practices.

Progress update

We are a leader in Climate Action 100+, an investor initiative seeking to ensure that the world’s largest greenhouse gas emitters act on climate change. We have secured significant emission reduction commitments through the eight company engagements that we lead, proving that investor engagement works.

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.

In May 2021, for example, ExxonMobil’s shareholders voted to replace three board members with three new independent directors from a slate proposed by activist investment manager Engine No. 1—a proposal that had been supported by CalSTRS from the beginning. This historic board election will strengthen ExxonMobil for the future, as the new directors will help equip their board with the skills needed to drive systemic change and prepare for the global energy transition. This is a remarkable demonstration of shareholders effecting change in the companies they invest in to contribute to the sustainable value of their investments.

Objective 5: Communicate strategies

Why is this important?

To be transparent about our goals, ambitions and activities with our beneficiaries, partners and global investment peers. We provide in-depth reports detailing our climate-related activities every three years.

Progress update

Our 2020 Green Initiative Task Force Report provides additional details about the work plan. We will continue to publish regular updates on our low-carbon transition and value of engagement webpages.