One of the world’s largest pension plans, Calstrs, has announced a delay in the publication of its 2023 climate report after uncovering inaccuracies in its carbon footprint calculations. The California public pension plan, managing a portfolio worth $331 billion, disclosed significant data and calculation issues, prompting the postponement of its emission data release until 2025.
Calstrs’ struggles in accurately estimating its carbon footprint have prompted concerns regarding similar disclosures by other large asset owners. The pension plan’s methodology, widely adopted globally, faced challenges due to incompatible and mismatched data sources, leading to inaccurate results.
The difficulties encountered by Calstrs could provide fodder for critics, particularly from Republican and business circles, who argue against the necessity of calculating corporate carbon footprints, labeling it as a futile expenditure of time and resources.
Having pledged to achieve net-zero portfolio emissions by 2050, Calstrs endeavors to measure the carbon emissions from its diverse asset base, which includes private and public companies, as well as real estate and infrastructure investments. However, challenges arose from the use of data from different providers and discrepancies in reporting times, especially for companies experiencing significant fluctuations in share prices.
The pension plan emphasized the necessity of delaying emissions calculations until data covering the same time period could be ensured to maintain accuracy. Moreover, it highlighted the difficulties in calculating emissions from its private equity portfolio due to data availability issues, noting that the industry lags behind other asset classes in this regard.
While the Securities and Exchange Commission (SEC) recently mandated climate risk disclosures for companies, concerns persist over the reliability and consistency of the data. BlackRock, the world’s largest asset manager, echoed these concerns, citing gaps between the measurement of its holdings in companies and the disclosure of emissions by those businesses.
The need for regulators to enforce mandatory disclosure standards and companies to provide audited metrics for reliable reporting remains paramount, as emphasized by the head of sustainable investing at another major asset manager. Until such measures are implemented, the challenge of accurately reporting carbon emissions is likely to persist.
