CalSTRS is a California fund managed by the Teacher’s Retirement Board. In addition to being a $336.2B pension fund, CalSTRS is known for its ESG and climate leadership. They are part of Climate Action 100+ and pledged to achieve net zero GHG emissions across its investment portfolio by 2050. However, the fund hit a hiccup in its GHG emissions calculations and reporting this year. Net Zero Investor reports:
“Like many other pension funds, CalSTRS calculates its share of a publicly traded company’s emissions based on its ownership of that company in percentage points. On [sic] key challenge with that is that valuations of individual companies can chance [sic] significantly over time. CalSTRS said that its ownership levels were being calculated at calendar year end using information provided by its custodian, State Street Bank. However, these year-end debt and equity values and these disclosures were being provided at varying points in time, hence generating significant inconsistencies for emissions calculations, CalSTRS staffers acknowledged.”
This seemingly small error in CalSTRS methodology is causing a delay in GHG reporting for 2023 data until 2025. This is a great example of how GHG emissions calculation, particularly those for financial institutions with vast portfolios, is a complex and meticulous process. A slight methodological error or false assumption can result in inaccurate data. Erroneous data not only pose a risk to a company’s climate progress but can result in legal claims and reputational risks depending on their context. In CalSTRS case, the error was caught and is being rectified; however, not every company will catch these errors, potentially publishing bad data. This is another reason why GHG emissions calculation methodologies should always be reviewed for errors and be made publicly available to avoid misleading consumers, investors, and regulators.
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