CalSTRS turns attention to nature stewardship

Californian pension giant is taking a year to educate itself on the 'complex' topic, mulls membership of collaborative groups.

A tree-shaped lake in the midst of healthy and lush nature serving as a metaphor for sustainable logging. 3d rendering

California State Teachers’ Retirement System has made nature a stewardship priority for 2024, as it mulls joining collaborative engagement initiatives on biodiversity.

The pension giant’s investment committee approved a new set of stewardship priorities in January, with nature and a new “workforce and communities” stream among the additions.

Under the workforce and communities stream, CalSTRS will look to engage on workforce culture and DE&I, and Just Transition in the utility sector.

On nature, the priorities document notes the “growing recognition that nature-based solutions will play a critical role in achieving a net-zero emissions economy”.

It says the focus area has been structured to allow staff to build knowledge of a “complex and nascent topic”.

CalSTRS says it will evaluate the best strategies and tactics for engaging both companies and policymakers.

Aeisha Mastagni, portfolio manager for sustainable investment and stewardship, told Responsible Investor that CalSTRS looked at the net-zero transition in two parts: allocating capital to solutions and influencing the broader market.

“We think the same way when it comes to nature-based solutions,” she said.

CalSTRS’ strategy refers to nature-based solutions rather than biodiversity.

However, Mastagni said the fund “sees ‘nature-based solutions’ as an all-encompassing phrase”. “It includes not only the risk of loss when it comes to biodiversity, nature and deforestation, but also ways we can invest in solutions that promote biodiversity,” she added.

Given the complexity of the area, Mastagni said CalSTRS will spend a year focusing on learning more about the subject and educating staff. The fund will then determine where it can be most effective and provide meaningful results and outcomes, as well as where it can be most impactful to mitigate portfolio risk.

“Almost every company touches nature in a different way and at different levels, so we want to spend our time making sure we’re asking the right questions and working with the right companies and the right partners.”

The fund is looking at signing up to collaborative engagement initiatives such as Nature Action 100 or the Principles for Responsible Investment’s Spring initiative. Mastagni noted, however, that it has “a finite number of resources” and wants to make sure that these are efficiently allocated.

“We’re spending the next couple of months really examining all of those collaborative efforts and determining where we should put the resources,” she said.

Asked how the fund evaluated which groups to sign up to, Mastagni said it looked at the resource demand, whether the objectives of the group are aligned with those of CalSTRS, whether it was relevant to the portfolio and whether CalSTRS can measure the outcome and demonstrate results.