For the 2024 proxy season, CalSTRS is zeroing in on board members whose companies fail to measure and curb methane emissions. Part of its long-held advocacy campaign on environmental issues, the California State Teachers’ Retirement System (assets: $331.4 billion) says it is concentrating on methane because it is an especially powerful greenhouse gas.
“Methane has 80 times the warming potential of carbon dioxide,” another greenhouse gas, says Aeisha Mastagni, a senior portfolio manager on CalSTRS’ sustainable investment and stewardship strategies team, in an interview.
The pension fund voted against the boards of directors at 2,035 companies during the 2023 proxy season because they did not furnish what it said were necessary climate risk disclosures.
In addition to proxy challenges, CalSTRS is engaging with companies directly to try convincing them to lower emissions. It also has teamed up with other environmental-minded organizations, through the Climate Action 100+ initiative, to argue for changes.
Due to methane’s shorter life—it lingers in the atmosphere for 12 years, as opposed to decades for carbon dioxide—reduction in its discharges would have the most immediate impact, says Mastagni.
By volume in the air, carbon dioxide is the most plentiful at 75%, with methane next at 19%, and other gases such as nitrous oxides making up the rest. The International Energy Agency indicates methane emissions are approximately 70% greater than estimated worldwide. Some three-quarters of methane emissions could be abated with existing technology, according to the IEA. Aside from oil and gas wells and leaky pipelines, methane escapes into the atmosphere from farms and landfills.
To CalSTRS, the point of urging methane disclosure is to compel action, even though the fund typically has just 1% to 2% of company shares. “This is leverage to hold them accountable and to communicate with the markets” to provide additional pressure, in Mastagni’s view.
On the governmental front, there has been some movement on methane and other greenhouse gases. In March, the Securities and Exchange Commission enacted a rule that requires public companies to disclose their greenhouse gas emissions in annual reports and securities registration documents, starting in 2026. Business groups and Republicans vehemently opposed the SEC action, saying it would make U.S. stocks less attractive to companies seeking to list in American exchanges. A U.S. appeals court temporarily halted the new rules, but several cases challenging the rule have been consolidated in the U.S. Eighth Circuit Court of Appeals, and the initial stay was lifted. The Eighth Circuit court has not yet ruled on an emergency motion for a new stay.
Late last year, the U.S. Environmental Protection Agency issued a regulation mandating that oil-and-gas companies monitor production facilities for leaks and repair them. It also sought to reduce flaring, in which excess methane from wells is burnt off at the site. Texas, the nation’s largest energy-producing state, filed a court complaint in March seeking to block the EPA action.
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Tags: Aeisha Mastagni, California State Teachers’ Retirement System, CalSTRS, EPA, farms, landfills, methane, SEC