Externalities and the Common Owner: View From a Shareowner

• Date: 01 August 2021

8-2021 ENVIRONMENTAL LAW REPORTER 51 ELR 10673

COMMENT

by James Andrus and Anne Simpson

James Andrus is an Investment Manager and Financial Markets Lead and Anne

Simpson is the Managing Investment Director, both at the Board Governance and

Sustainability Program for the California Public Employees’ Retirement System.

EXTERNALITIES AND THE

COMMON OWNER: VIEW FROM

A SHAREOWNER

California Public Employees’ Retirement System

(CalPERS) is the largest-dened benet public

pension fund in the United States, with about

$450 billion in global assets under management. CalPERS

actively protects its rights as an investor and the Board

Governance and Sustainabil ity program sits at the center of

this eort. Collectively, we have more t han 40 years-expe-

rience in corporate governance and have been very close

to CalPERS’ work on engagement, advocacy and integra-

tion of climate change risk and opportun it y, as well a s the

conduct of this work through partnerships. We appreciate

Madison Condon’s focus on the great work of Climate

Action 100+ in her article Externalities and the Common

Owner (the Article).¹ As the convener and co-founder of

Climate Action 100+, we are delighted to provide back-

ground on CalPERS’ focus on climate change, our work

with Climate Action 100+, and some of our thoughts on

the Article given our knowledge of the common owner-

ship debate.

In 2020, CalPERS completed a Taskforce on Climate-

Related Financial Disclosure (TCFD) report titled, “CalP-

ERS’ Investment Strategy on Climate Cha nge.”² In that

report, we highlighted our work with various entities to

address climate change. Such groups include the Princi-

ples for Responsible Investment (PRI), Ceres, the United

Nations Global Investors for Sustainable Development,

and the Vatican Dialogue on the Energy Transition and

Care for Our Common Home. Likewise, we touched on

our approach to leverage positions on the advisory boards

of regulators to advocate for mandatory climate risk report-

ing. Such boards include the Investor Advisory Committee

to the Securities and Exchange Commission, the Investor

1. Madison Condon, Externalities and the Common Owner, 95 W. L. R.

1 (2020), https://digitalcommons.law.uw.edu/wlr/vol95/iss1/4.

2. CalPERS’ Investment Strategy on Climate Change, CPERS (June 2020),

https://www.calpers.ca.gov/docs/board-agendas/202006/invest/item08c-

01_a.pdf.

Advisory Group to the Public Company Accounting Over-

sight Board (PCAOB), the Financial Accounting Stan-

dards Advisory Committee (FASAC), the Commodities

and Futures Trading Commission (CFTC) special com-

mittee on climate change, and the International Financial

Reporting Standards (IFRS) Advisory Council, on which

we represent the Council of Institutional Investors (CII).

Partnering with organizations allows CalPERS to share

insights and pool resources with fellow investors with

shared object ives.

e origins of Climate Action 100+ lie in CalPERS’

commitment to mapping its carbon footprint. In 2014,

CalPERS became the rst U.S. signatory to the PRI Mon-

tréal Pledge, thereby agreeing to measure and publicly dis-

close the carbon footprint of our global equity investment

portfolio. After analyzing more than 10,000 companies

within our portfolio, we found approximately 80 com-

panies were responsible for 50% of the portfolio’s scope 1

and 2 greenhouse gas emissions. e emissions trajectory

of these systemically important carbon emitters is critical

in determining whether the global economy will meet the

goal of the Paris Agreement to keep global warming to 1.5

degrees Celsius. CalPER S recognized that other global

investors were likely to have similar holdings in their port-

folios, so we convened a series of meetings hosted by the

French mission to the United Nations. e result was a

new partnership among regional and global investor net-

works (North America, Europe, Australia, and A sia) to

launch Climate Action 100+. e list of companies in Cli-

mate Action 100+ cover a wide range of sectors including

oil and gas, utilities, tra nsportation, metals and mining,

construction materials, industrials, chemicals, and food,

beverages, and forestr y. Climate Action 100+ was ocially

launched at the One Planet Summit in December 2018.

e initiative has since been recognized by the United

Nations as one that will drive progress toward meeting the

ambition of holding global warming to 1.5 degrees Celsius.

CalPERS plays a leading role in Climate Action 100+ as

Copyright © 2021 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®, http://www.eli.org, 1-800-433-5120.