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Bridgewater tells CalSTRS world is not on track for net zero; staff outlines steps taken and limits
Summary
Bridgewater Associates told CalSTRS the global energy transition is slower and more politically fraught than expected; CalSTRS staff summarized progress measuring emissions, engaging companies and building private low-carbon investments while flagging data and political headwinds.
Bridgewater Associates presented a macro view of the global energy transition and told the CalSTRS Investment Committee that the world is not yet on a net-zero pathway. Daniel Hochman, Bridgewater’s head of sustainability research, said the interaction of geopolitics, shifting policy priorities (including tariffs and industrial competitiveness), higher interest rates and supply-chain changes has slowed decarbonization in some sectors.
Hochman outlined two primary investor risks: (1) physical risks from climate change that damage assets and (2) transition risks from the economic and policy changes required to decarbonize. He said about half of the technology needs for decarbonization are already economical (solar, onshore wind, electrification and some nuclear) while others (direct air capture, some fuels) are not yet viable at scale; the latter face reduced policy support in the present environment.
CalSTRS staff then presented a progress report on the fund’s net-zero pledge. Brian Rice, portfolio manager for sustainable investments and stewardship strategies, told the committee staff continue to implement a three-pillar approach: measuring and reducing portfolio emissions; engaging and using influence with high emitters; and increasing investment in low-carbon solutions. Highlights: the global equities team reduced portfolio emissions (staff cited a >16% reduction in one public-equity sleeve), the real estate team increased asset-level measurement, and the SIS private portfolio has grown toward its low-carbon commitments with nearly $3 billion in commitments since inception.
Staff noted persistent challenges: scope-3 data gaps, political and regulatory headwinds, and the need to define consistently what counts as a low-carbon solution across asset classes. Committee members asked for clearer external metrics and case studies of engagements; staff said they will work toward more granular, asset-class-level reporting and will pursue collaborative engagement with peers and industry bodies.
