Calstrs plans green shift after Joe Biden’s victory

The world’s largest public pension fund for teachers is planning to accelerate changes to its investment portfolio in a bid to become greener following the victory of Joe Biden in the US election.

Jack Ehnes, chief executive of the $254bn California State Teachers’ Retirement System, said Calstrs would speed up the implementation of its green investment strategy after Donald Trump lost the poll.

The Trump administration had been locked in a long-running legal battle with California, where Calstrs is based, to prevent the state from setting its own emission standards as part of efforts to tackle climate change.

In contrast, Mr Biden has promised to rejoin the Paris climate agreement, the international pact designed to try to avoid dangerous levels of global warming.

Mr Ehnes told the Financial Times: “Clearly the outcome of the election was going to impact our success with our transition strategy to a low-carbon economy. The policies of the Biden administration will likely produce a number of opportunities for investors with sustainable investment strategies. We will probably be accelerating our path to low carbon.”

Calstrs has come under pressure to divest from its estimated $6bn investments in fossil-fuel companies by unions representing teachers including United Teachers of Los Angeles and the California Federation of Teachers, and from pressure groups such as Fossil Free California. The Faculty Association of California Community Colleges has also urged Calstrs to move its money out of fossil fuels.

“Continuing to hold investments in fossil-fuel corporations is imprudent and inconsistent with the fiduciary duty of Calstrs,” wrote Debbie Klein, FACCC president, in a letter in September.

Mr Ehnes added that efforts to make progress on climate change met barriers with the Trump administration.

“Attacks were happening on some of the emission policies that our state [California] has been more progressive on. US regulations and mandatory disclosure requirements of climate risks have also lagged behind other countries,” said Mr Ehnes.

Calstrs, which serves almost 1m former and current public sector education workers, established a working group in 2019 charged with reducing climate-related risks in its portfolio, including expanding its low-carbon investments.

About $5.4bn of the fund is invested in activist and sustainability-focused funds, with about $505m invested in solar, wind and other renewable power generation and $286m in green bond holdings. Almost half of the fund, or $124bn, is allocated to listed equities.

Unlike a growing number of pension schemes, Calstrs has not set a target to reach net-zero emissions across its investments.

IFM Investors, the A$148bn Australian pension fund-owned asset manager, committed in October to reducing greenhouse gas emissions across its asset classes with a net-zero target by 2050.

Mr Ehnes said: “We haven’t made that kind of declaration but we certainly have the ambition to reach that goal.”

He added that he planned to put “some serious money to work” in low-carbon investments.

“The greater electrification of vehicles, increased regulation of methane emissions, and support for sustainable finance and infrastructure are some examples that could accelerate investment flows to a low-carbon economy,” he said.

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