Calstrs reveals problems calculating carbon footprint of its $331bn portfolio

Calstrs Delays Climate Report Publication Due to Inaccurate Carbon Footprint Calculation

Calstrs, one of the world’s largest pension plans, has had to delay the publication of its 2023 climate report after discovering inaccuracies in the way it was calculating the carbon footprint of its $331bn portfolio.

The giant California public pension plan has now announced that it will not release its 2023 carbon emission data until 2025.

According to the agenda notices for its May 1 investment board meeting, Calstrs disclosed that it had encountered “significant data and calculation issues” while trying to estimate its 2022 carbon footprint. The use of incompatible and mismatched data led to inaccurate results.

This development raises questions about similar net zero disclosures by other large asset owners, as Calstrs employs a calculation method that has been widely adopted globally, according to industry experts.

The difficulties faced by Calstrs could also strengthen the arguments of Republican and business critics who claim that calculating corporate carbon footprints is a waste of time and resources.

Calstrs’ Commitment to Sustainable Development Goals

Calstrs, which manages pensions for about 1 million teachers and educators, pledged in 2021 to achieve net zero portfolio emissions by at least 2050, joining a group of large asset owners with similar goals.

As part of this effort, Calstrs aims to measure the carbon emissions from its assets, which include private and public companies, real estate, and infrastructure.

To calculate the carbon emissions, Calstrs determined its ownership share in each company it owns and assumed responsibility for that share of the company’s reported emissions.

Data Challenges and Delayed Emissions Calculations

The problems arose because the data came from different providers. While the stakes were valued at the end of the year, the total company values and emissions were reported at various times throughout the year.

This discrepancy in timing significantly affected the results for companies that experienced significant movements in their share prices. Calstrs stated that determining its ownership relative to a company’s total value has proven challenging.

To ensure accurate data, Calstrs concluded that it must delay each year’s emissions calculations until it can ensure that all the data covers the same time period.

Additionally, Calstrs highlighted the challenges of calculating carbon emissions from its private equity portfolio, as the industry lags behind other asset classes in terms of data availability.

Implications for Carbon Emissions Reporting

The question of how best to report carbon emissions has been a contentious one. While the Securities and Exchange Commission recently mandated companies to disclose their climate risks, concerns about inconsistent and unreliable data led to a scaled-back scope of the rule.

BlackRock, the world’s largest asset manager, also faced challenges in providing accurate carbon footprint estimates for its corporate holdings due to gaps between measurement dates and companies’ disclosure of emissions.

Experts argue that mandatory disclosure standards imposed by regulators and audited metrics from companies are necessary to address these challenges and ensure reliable reporting.

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SDGs, Targets, and Indicators Analysis

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 13: Climate Action

The article discusses the delay in the publication of Calstrs’ climate report due to inaccuracies in calculating the carbon footprint of its portfolio. This issue directly relates to SDG 13, which focuses on taking urgent action to combat climate change and its impacts.

2. What specific targets under those SDGs can be identified based on the article’s content?

• Target 13.2: Integrate climate change measures into national policies, strategies, and planning.
• Target 13.3: Improve education, awareness-raising, and human and institutional capacity on climate change mitigation, adaptation, impact reduction, and early warning.
• Target 13.5: Implement the commitment undertaken by developed-country parties to the United Nations Framework Convention on Climate Change to a goal of mobilizing jointly $100 billion annually by 2020 from all sources to address the needs of developing countries in the context of meaningful mitigation actions and transparency on implementation and fully operationalize the Green Climate Fund through its capitalization as soon as possible.

The article highlights the challenges faced by Calstrs in accurately calculating its carbon emissions, which aligns with Target 13.2 of integrating climate change measures into policies and planning. It also mentions the need for improved data availability and disclosure, which relates to Target 13.3. Additionally, the article indirectly touches upon the financial aspect of climate action, which is relevant to Target 13.5.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

• Indicator 13.2.1: Number of countries that have communicated the strengthening of institutional, systemic, and individual capacity-building to implement adaptation, mitigation, and technology transfer, and development actions.
• Indicator 13.3.1: Number of countries that have integrated mitigation, adaptation, impact reduction, and early warning into primary, secondary, and tertiary curricula.
• Indicator 13.5.1: Mobilization of financial resources by developed countries to support the efforts of developing countries in implementing the United Nations Framework Convention on Climate Change.

The article does not explicitly mention any indicators. However, Indicator 13.2.1 can be relevant to measure progress in strengthening institutional capacity for accurate carbon emissions calculations. Indicator 13.3.1 can be used to assess the integration of climate change education and awareness into curricula. Indicator 13.5.1 can measure the mobilization of financial resources for climate action.

Table: SDGs, Targets, and Indicators

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Fuente: ft.com

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