2011 Themes and Highlights
Commentary Jack Ehnes, CEO, CalSTRS
Today, climate risk management remains one of the signature issues in CalSTRS corporate governance program. We work hard to improve our portfolio companies’ climate risk awareness and management. Our partnership with CDP remains essential to the CalSTRS corporate governance engagement efforts that seek to boost long-term shareholder value.
CalSTRS was one of the first public pension funds in North America to support the efforts of the Carbon Disclosure Project. We recognized the growing risk to our investment portfolio that carbon emissions presented and we realized that managing carbon risk needed to be one of the top priorities of our corporate governance program. We believed that the CDP survey presented an ideal means for us to gauge which companies were and were not paying attention to carbon risk.
We depend on data from CDP surveys to evaluate which companies are and are not adequately disclosing the steps being taken to mitigate climate risk. Earlier this year, to further support the efforts of the CDP, CalSTRS sent letters to all U.S. companies that did not respond to last year’s questionnaire, encouraging them to participate this year. We began dialogues with many of these companies and advised them of the importance of climate risk management and requested that they reconsider their decision to not respond.
CalSTRS supports the growing use of climate-related shareholder resolutions. We strongly believe this is an important tool for investors to use as an engagement strategy, and here again, CDP data is essential to the development and execution of CalSTRS shareholder resolutions.
For the past several years, CalSTRS has filed resolutions at portfolio companies that did not respond to the CDP questionnaire. These proposals asked companies to improve their level of disclosure on their carbon emissions exposure.
In today’s economic environment, there is strategic advantage to addressing climate risk. Complying with CDP initiatives implies you proactively deal with risk factors and that can lead to benefits for both corporations and institutional investors. Companies that measure their carbon emission exposure are better positioned to respond to changing regulatory requirements and to take advantage of efficiency opportunities that can increase shareholder value.
Green is a good brand and it appeals to a new generation of sophisticated investors. Institutional investors look for opportunities to remind companies to recognize and report their climate risks and liabilities. Working together we can lead the way as addressing the challenges of climate change becomes ever more critical to sustainable investment growth.
On behalf of CalSTRS, I thank the CDP for the work that went into producing the 2011 S&P 500 report.
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