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CalSTRS investment committee updates stewardship priorities, highlights workforce disclosure, methane and AI engagement
Summary
CalSTRS staff presented the annual stewardship priorities to the Investment Committee on Jan. 8, 2025, reviewing public-company engagement results, human capital disclosure progress, targeted methane work, responses to corporate DEI rollbacks, and early-stage artificial intelligence and biodiversity engagements.
At its Jan. 8, 2025 meeting, the California State Teachers' Retirement System Investment Committee received an annual update on stewardship priorities from staff of the Sustainable Investment and Stewardship (SIS) unit, who described engagement activity and early outcomes across human capital disclosure, climate-related work streams and new focus areas such as artificial intelligence and biodiversity.
CalSTRS staff said stewardship is intended to mitigate portfolio risk, support long-term value creation and promote sustainable practices aligned with the system's duty to its teachers. Ayesha Mastagni, senior portfolio manager in the Sustainable Investment and Stewardship Strategies unit, told the committee the team uses three criteria when selecting priorities: relevance to long-term fund performance, capacity to influence change and the ability to deliver measurable outcomes. "We set up a three-year plan because stewardship doesn't happen overnight," Mastagni said.
Staff reported progress on several long-running initiatives and described new engagement streams. Lynn Paquin, a portfolio manager with SIS, said the team engaged 478 public companies in 2024 representing roughly $46.5 billion of combined market value and that public disclosure of human capital management metrics has risen from about 5% of S&P 500 companies in 2020 to over 75% today. "We have seen some good progress," Paquin said of workforce data disclosure.
Niall Gerritsen, portfolio manager leading climate engagement work, summarized three net-zero-related efforts: continued leadership in Climate Action 100 engagements, a targeted list of 45 high-emitting public companies not previously engaged by major initiatives, and a focused campaign on methane emissions from oil and gas operations. Gerritsen said methane is a tractable target because leaked gas can be captured and sold; he added that 33 portfolio companies have joined the United Nations methane framework so far, and roughly 10 of those joined after direct engagement by CalSTRS staff.
On diversity, equity and inclusion, staff described rapid responses when several large companies announced rollbacks of DEI programs in 2024. Rekha Vaitla (staff lead on related work) said the stewardship team wrote to companies that announced rollbacks and had had roughly 10 follow-up meetings. "The vast majority told us they are not dropping programs entirely but are pulling back on sponsorships and changing language," Paquin said. The team said it will monitor reporting in the upcoming proxy season for any substantive program changes.
Staff also noted expanding engagements on responsible firearms retailing and on artificial intelligence. Michael Weston leads the firearms work, meeting with retailers and payment providers to review legal sales practices and employee/community safety programs. On AI, staff said they are in a learning-and-engagement phase, incorporating AI-related questions into existing dialogues with portfolio companies and broadening outreach to new sectors such as health care to assess governance, energy demand and workforce implications.
Biodiversity was added as a new stewardship focus in late 2024 when CalSTRS joined Nature Action 100; staff said they currently participate in engagements with four food-and-beverage companies and expect to deepen learning during 2025. Mastagni said the team will continue to prioritize actions where investor engagement can change corporate behavior and provide measurable outcomes for the fund.
During Q&A, State Treasurer Frank Ruffino asked whether CalSTRS has contingency measures to ensure consistent climate-related reporting if U.S. rulemaking stalls. Mastagni and Gerritsen replied that CalSTRS supports the International Sustainability Standards Board as a global baseline and expects large companies to retain core KPIs even if some reporting formats change. Steve McCourt, an advisor in the meeting, praised the stewardship work as "market-leading" and focused on risk mitigation for the fund.
Staff said they will report back on metrics and outcomes in the quarterly engagement report and at the next annual update.
