Even in California – a state where you think everyone would agree on climate issues – consistency in Net Zero approaches doesn’t exist. This piece from Net Zero Investor raised my eyebrows about how different net zero investment strategies are in play:
“To the outside world, California seemed the natural home of the net zero asset owner. Yet, looking beyond the broad strokes of what the state’s authorities stand for lies a mixed outlook on climate issues by California’s pension funds, and the way divestment and portfolio decarbonisation are handled by numerous retirement schemes in the state.”
- Los Angeles County Employees Retirement Association (LACERA) emphasizes “[d]eliberate, ongoing portfolio analytics and engagement [as] key tools in successfully navigating the LACERA portfolio through the energy transition.”
- At City of Fresno Retirement Systems (CFRS): “Net zero is not an adopted policy at CFRS. Due to data inconsistency from different methodology and approaches, and unfortunately an ever-evolving regulatory environment means, it is not a consistent target.”
- The University of California and the California State University System completely divested fossil fuel holdings and “fully embraced sustainable investment options, such as wind and solar power.”
- CalSTRS and CalPERS stand in contrast to the state university pension funds: they see divestment as “a last resort action that can have a lasting negative impact on the health of the Teachers’ Retirement Fund, while also severely limiting our ability to shape corporate behaviour for long-term sustainable growth.”
The different approaches to climate risk management make it impossible for companies to please all of these shareholders. Companies may feel they are chasing their tails trying to please everyone when that isn’t possible. Executives should seek board input on prioritizing shareholders’ (and other stakeholders’) ESG/climate strategies and getting “permission” to move in a direction that may be inconsistent with the desires of some important shareholders. This should reduce confusion and wasted efforts chasing conflicting goals.