CalSTRS, the world’s largest educator-only pension fund, says it expects greenhouse gas (GHG) emissions reporting to become mandatory in the near future, as it revealed record votes against boards in the 2023 proxy season.
The $315 bn fund voted against 2,035 boards across industries including steel producers, transportation companies and metal and mining firms. It noted that a lack of globally mandated rules for climate reporting makes assessments harder – but said it expected new rules in the near future.
‘We need to make informed decisions to manage our portfolio on behalf of California’s educators, but that job is made more difficult if companies aren’t fully measuring and tracking their emissions,’ says Aeisha Mastagni, a portfolio manager on CalSTRS’ sustainable investment and stewardship strategies team, in a statement. ‘Fortunately, we believe mandatory GHG emissions reporting is on the horizon.’
CalSTRS has long lobbied the SEC, seeking minimum climate-disclosure standards for companies that it says would enable investors to make investment decisions based on relevant and reliable data. ‘While SEC-mandated standards do not currently exist, investment experts are hopeful the SEC will finalize enforceable and practical climate-disclosure rules before the end of 2023,’ says the fund.
CalSTRS welcomes the International Sustainability Standards Board’s (ISSB) first two sustainability-related disclosure standards. It says the ISSB is expected to partner with the SEC and other jurisdictions to establish minimum climate-disclosure standards.
The most basic disclosures
Explaining that CalSTRS had ‘voted against boards that didn’t meet the most basic disclosure expectations’, Mastagni stresses the key role of such public disclosures in allowing the fund to reach its net-zero goals. ‘Companies cannot be held accountable for reducing their GHG emissions without them,’ she says.
In 2021, CalSTRS pledged a net-zero investment portfolio by 2050 or sooner.
Describing climate change as ‘one of the greatest threats to the planet’ – as well as a broad risk to its portfolio – CalSTRS says it wants to know whether companies in its portfolio are planning appropriately for the future and that it expects them to ‘actively take advantage of opportunities to reduce the risks of climate change’.
Setting out its expectations for the companies it invests in, CalSTRS says that ‘at a minimum’, firms should report direct GHG emissions (also known as Scope 1 emissions), indirect emissions (Scope 2) and issue a climate report based on the TCFD recommendations. It also expects companies to curb – or have a ‘credible plan’ for curbing – their GHG emissions.