The California State Teachers’ Retirement System announced it voted against a record 2,258 boards of directors among its portfolio companies during the 2024 proxy season, mainly due to insufficient climate risk disclosure. The tally breaks the former high of 2,035 companies, set last year.
The fund has been busy this proxy season. Its votes came among more than 10,000 global company meetings in which CalSTRS voted on more than 100,000 ballot items on topics ranging from human capital management—such as workforce management and employee wellness—to board governance and climate-related risks.
According to the $341.4 billion pension giant, it expects all of its portfolio companies to help manage the risks and investment opportunities associated with climate change, as well as to publish a report on sustainability-related disclosures that follow the International Financial Reporting Standards. The standards have replaced the Task Force on Climate-Related Financial Disclosures as the monitor of companies’ progress on climate-related disclosures.
CalSTRS also wants the companies in which it invests to disclose their Scope 1 and Scope 2 greenhouse gas emissions. Scope 1 is the direct emissions a company makes, like smoke from its factories, and Scope 2 emissions are indirect, such as those stemming from the electricity a business uses. CalSTRS expects the biggest emitters among its portfolio companies to set targets to reduce GHG emissions.
“We need consistent, accurate and comparable data from all companies in our portfolio to mitigate risk and accurately measure and reduce emissions,” said Aeisha Mastagni, a senior portfolio manager on CalSTRS’s sustainable investment and stewardship strategies unit, in a statement. “We will continue to use our voice alongside fellow institutional investors to hold companies accountable for climate-related disclosures.”
One encouraging development, according to the pension fund, was that there was “considerable improvement” in reporting of methane emissions by its portfolio companies, despite their inconsistent overall climate data disclosure. CalSTRS noted that methane is 80 times more potent than carbon dioxide, and CalSTRS is urging companies to join the United Nations-led Oil and Gas Methane Partnership 2.0 framework.
“Focusing on methane emissions is one of the most economically viable and immediate means to slow climate change,” stated the CalSTRS announcement, citing the International Energy Agency’s estimates that 30% of methane emissions from fossil fuel operations can be decreased at no net cost.
“Methane has a massive impact, and mitigation of methane is one of the more efficient ways to limit the impact of greenhouse gases worldwide,” said Mastagni.
CalSTRS credited engagements with its portfolio companies for convincing 10 of them to join the Oil and Gas Methane Partnership 2.0, including ExxonMobil, Chevron, Harbour Energy, OMV and Vital Energy. The fund also stated that several companies with which it has engaged have become members through mergers with companies that were already part of OGMP 2.0.
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Tags: California State Teachers’ Retirement System, CalSTRS, Chevron, Climate Change, Climate Risk, Disclosure, ExxonMobil, GHG, Greenhouse Gas Emissions, Harbour Energy, Oil and Gas Methane Partnership 2.0, OMV, Proxy season, Scope 1, Scope 2, Sustainability, Task Force on Climate-Related Financial Disclosure, TCFD, Vital Energy