Externalities and the Common Owner: View From a Shareowner

Date01 August 2021
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.
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),
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.

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