The California State Teachers’ Retirement System (CalSTRS) announced last week it is joining an initiative led in part by Pope Francis to combat the effects of climate change. Alongside the investment strength of CalSTRS, a number of high-profile oil and gas companies have also joined the accord, including Royal Dutch Shell, Chevron, ExxonMobil, Repsol, Invesco, and others.
“We recognize that a significant acceleration of the transition to a low-carbon future beyond current projections requires sustained, large-scale action and additional technological solutions to keep global warming below 2°C while advancing human and economic prosperity,” the group, called The Energy Transition and Care for our Common Home, said in a statement.
In May, CalSTRS formalized carbon-pricing-friendly language in its investment policy language, by making clear the investment committee “needs to…consider actions we can take to mitigate [climate change] risk and identify related investment opportunities. How we engage companies and vote our proxies will also reflect our understanding of the low carbon economic transition.”
The Vatican-endorsed group collectively acknowledged it understands the necessity for corporate disclosures on emissions-related strategies and results, and the importance of carbon pricing towards the reduction of emissions.
Pope Francis met with CalSTRS and executives from the group to emphasize the need for a “radical energy transition” that tackles the most significant challenges of climate change that they can carry out, given their positions within their respective organizations.
“As the largest educator-only pension fund and a global investor, we have a role to play in promoting the global economy’s transition to a low carbon future,” said Harry Keiley, vice chairman of the CalSTRS board, who also is chair of the CalSTRS investment committee. “The CalSTRS board recognizes that climate change poses significant existential and financial risks, and we are committed to understanding and addressing them as an urgent priority.”
CalSTRS is already held to the requisitions of California’s Public Divestiture of Thermal Coal Companies Act, which requires the pension, alongside the California Public Employees’ Retirement System, to divest their respective holdings of thermal coal power, as one of the state’s broader efforts to decarbonize the California economy and to transition to clean, pollution-free energy resources.
The pension’s investment committee recently approved a policy in support of carbon pricing. Subsequently it is also advancing a $2.5 billion program to invest in the stock of companies with low carbon emissions, while at the same time monitoring its external equity managers to ensure they are incorporating sustainability factors in making investment decisions.