CalSTRS’ latest newsletter summarizes its May 5 report to the Teachers Retirement Board on its progress in achieving its net zero emissions pledge by 2050. Notably in the context of the SEC’s climate disclosure proposal (which suggests that many companies will be subject to the proposed rule’s Scope 3 emissions disclosure requirements), in determining which carbon emissions currently financed by its investment portfolio to measure, the report provides (emphasis added):
Emissions scopes: Staff considered which carbon emissions scopes to measure. Measuring scope 1 emissions (direct emissions) and scope 2 emissions (energy use) of underlying company investments were obvious choices. Our review of other net zero portfolio commitments showed that most investors that have made a net zero pledge have committed to measuring and managing only scope 1 and scope 2 emissions in their portfolio. Most investors are currently not measuring scope 3 emissions (supply chain and end-use emissions) of their investments. The current market consensus is that the methods of accounting for scope 3 emissions are still under debate, and any emissions data produced would likely not be reliable or useful for decision making. Because of this, staff concluded that measuring scope 3 emissions would not presently add value to our pledge implementation efforts. However, as methods for accounting for scope 3 emissions evolve, and the usefulness of the emissions data improves, staff will reconsider the decision regarding scope 3 emissions measurement.
CalSTRS’ report to the Board indicates that, contrary to prior years, when it may not have supported shareholder proposals “if we thought the company met the spirit of the resolution, or if the company was planning to meet the spirit,” it has stepped up its support for shareholder proposals that request “robust net zero or climate commitments, targets, or reports” to send a message to companies that it is looking for robust climate reporting and credible emissions reduction targets, and without regard for ongoing constructive engagement with the company.
Many current shareholder proposals are asking companies to be more rigorous in their climate strategy and planning, and so we are supporting all of these to send a consistent message that CalSTRS wants strong climate reporting and credible emissions reduction target setting. We will support these proposals even if we are participating in constructive engagement with companies in order to tell companies directly and privately, as well as through our vote, what actions we support.
It expects all companies to have climate change strategies, but sets the bar higher for the highest emitters. Even then, however, CalSTRS expects those companies to report Scope 1 and 2 (not Scope 3) emissions. It will vote against all incumbent directors at the highest emitters and the largest global companies that fail to demonstrate appropriate board oversight.
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This post first appeared in the weekly Society Alert!