CalSTRS says climate is major portfolio threat, companies must walk the walk on net-zero
By Ben Ratner
A few weeks ago, EDF’s Ben Ratner spoke extensively with Brian Rice, a portfolio manager at California State Teachers’ Retirement Systems about key issues in environmental social and governance investing.
CalSTRS is the largest educator-only pension fund in the world with roughly $243 billion in managed assets. EDF has been working closely with the firm on corporate engagement for more than five years.
This is the first of a two-part Q&A series with CalSTRS examining prospects on ESG and climate investing through the energy transition. This portion of the discussion explores the rise of ESG, the importance of policy, and what comes next for companies with net-zero commitments.
Ben: CalSTRS has a long-standing commitment to climate. Why is it so important to your organization?
Brian: Climate has been a top priority for us for the past 15 years. We have integrated climate into our beliefs, policies, stewardship efforts and investments. Recently we realigned our focus to align with the ongoing transition to a low-carbon economy. We have spent a good amount of time working to understand what is driving the transition, its impact on investments, stewardship and engagement, and what we can do to drive the outcome we want.
We are invested everywhere and climate impacts our investments in so many ways — it is one of the biggest threats to our portfolio and arguably the biggest threat to our long-term portfolio value.
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Ben: What is the most effective strategy CalSTRS uses to drive change?
Brian: Probably where we have been the most impactful is corporate engagement. You see initiatives, such as the Climate Action 100+ , where many new companies are committing to significantly reducing emissions, which is encouraging. And net-zero by 2050 commitments are ramping up quickly among companies. Yet the process that gets these companies to achieve their goals remains to be seen.
Corporate engagement is critical to raise ambition, but policy is arguably even more important to support implementation of that ambition.
In all the years I’ve been doing this, two achievements have always stood out as the most important for climate — developing viable energy storage technology and implementing a meaningful price on carbon. We can support storage technology development and implementation through investments, but the price on carbon requires policy changes.
Ben: Have you observed changes in how the investment community views the importance of policy in solving climate change?
Brian: Yes, though I think it is manifested more regionally, given some frustration among investors who wonder how much policy change they can realistically make now at the federal level. I believe most investors understand the importance of...
