CalSTRS joined Nature Action 100 in September and recently engaged with four food and beverage companies—Archer Daniels Midland, Inner Mongolia Yili Industrial Group, Hormel Foods and Tyson Foods. NA100 is a global investor-led engagement initiative which aims to support greater corporate disclosure and action to reverse biodiversity loss and mitigate financial risk. CalSTRS is working toward a better understanding of how biodiversity loss and a dependency on natural capital pose material risks to companies in the CalSTRS investment portfolio. Biodiversity is viewed as critical to achieving a net zero emissions economy, a stewardship priority for CalSTRS.

Joining Nature Action 100, which currently has more than 230 investor participants representing more than $30 trillion in assets, provides an opportunity to address the systemic risks of biodiversity loss and help portfolio companies remain profitable. Specifically, NA100 engages companies on six expectations:

• Ambition: Publicly commit to minimize contributions to key drivers of nature loss and to conserve and restore ecosystems at the operational level and throughout the value chain by 2030.
• Assessment: Assess and publicly disclose nature-related dependencies, impacts, risks and opportunities at the operational level and throughout the value chain.
• Targets: Set time-bound, context-specific, science-based targets informed by risk assessments on nature-related dependencies, impacts, risks and opportunities. Disclose annual progress against targets.
• Implementation: Develop a company-wide plan on how to achieve targets. The design and implementation of the plan should be developed in collaboration with Indigenous Peoples and local communities when they are affected. Disclose annual progress against the plan.
• Governance: Establish board oversight and disclose management’s role in assessing and managing nature-related dependencies, impacts, risks and opportunities. 
• Engagement: Engage with external parties including actors throughout the value chain, trade associations, policymakers, and other stakeholders to create an enabling environment for implementing the plan and achieving targets.

Nature Action 100 has developed a benchmark to track and report the progress of companies against these expectations. CalSTRS anticipates reporting more regularly on NA100 engagement over time.

Continued push for broad adoption of global sustainability disclosure standards

As of the end of 2024, CalSTRS staff responded to consultations issued by regulators in China, Korea, Japan, Chile, Switzerland, Hong Kong, Thailand and Mexico. These countries are considering integrating the International Sustainability Standards Board’s disclosure standards into their regulatory frameworks. CalSTRS responds to these consultations to advocate the adoption of general sustainability-related disclosures and climate-related disclosures. Widespread adoption of the ISSB standards is a focus for CalSTRS and falls under our Stewardship priority of Corporate and Market Accountability. Global standards allow for improved and more consistent disclosure, which in turn allows investors to be better informed about company risks and opportunities when making investment decisions. Through our responses to consultations to mandate these disclosures, we have engaged countries representing 26% of global gross domestic product and 38% of global emissions.

The significance of the International Sustainability Standards Board’s standards has increased due to continued difficulty to establish a climate risk disclosure standard in the U.S. Earlier this year, the Securities and Exchange Commission released its own set of mandatory climate-related financial risk disclosures for U.S. companies. However, the rule came under significant legal challenges and is unlikely to remain in place, as CalSTRS expects the SEC’s new leadership to withdraw support for the adoption of the climate-disclosure rule.

Global climate and biodiversity discussions advance

In fall of 2024, two important reoccurring sustainability-related events took place: the Convention on Biological Diversity (COP16) and the United Nations Climate Change Conference (COP29). Both events convened leaders in government and business from around the world. The COP16 event was concerned with protecting and preserving the planet’s biodiversity while COP29 focused more broadly on coordinating global efforts to address climate change.

By the conclusion of COP16, 119 countries had submitted national targets aligned with the Global Biodiversity Framework to address the key drivers of biodiversity loss. However, far fewer countries have submitted national biodiversity strategies and action plans, which more specifically detail how they plan to achieve their GBF targets. In an unprecedented move, the United Nations will reconvene COP16 in late February to address biodiversity financial resources and the monitoring framework.

Leading up to COP29, CalSTRS signed on to a global investor statement urging governments of the world to adopt whole-of-government approaches to implement policies intended to limit global temperature rise to 1.5 degrees Celsius above pre-industrial levels. At COP29, negotiations led to an increase in financial commitment from wealthy nations from $100 billion annually to $300 billion annually by 2035. These financial commitments assist developing nations with their transition toward clean energy and adaptation to climate change impacts. However, the figure still falls short of what many experts believe is the actual level of financial assistance required for these countries to transition smoothly.

The back-and-forth nature of negotiations at these events reveals the inherent challenges in coordinating a worldwide response to global issues. CalSTRS continues to monitor these outcomes and look for strategic opportunities to add our organization’s voice to the conversation.

Working alongside partners to address methane emissions

Nordea Asset Management recently received an award for leadership in climate action at the 2024 Principles for Responsible Investment in Person annual conference. CalSTRS recently allocated $450 million to Nordea’s Global Stars Public Equity Strategy. The multifaceted partnership with Nordea exemplifies CalSTRS' ability to work with external partners for both investment management services and stewardship expertise.

The award recognized Nordea’s leadership in a methane-focused collaborative engagement that included CalSTRS as a prominent participant. The engagement sought to influence oil and gas companies to join The Oil and Gas Methane Partnership 2.0  and adopt its framework for methane measurement, reporting and target-setting. Methane mitigation is a focus area of the CalSTRS stewardship priority Net Zero Transition. Lowering methane emissions is one of the most economically viable and immediate means to slow climate change. The International Energy Agency estimates 30% of methane emissions from fossil fuel operations can be abated with no net cost. The engagement is ongoing and has grown from 15 companies in 2022 to 65 in 2024. To date, 14 companies have joined the OGMP 2.0.