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Calstrs, one of the world’s largest pension plans, has had to delay 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 said it will not release its 2023 carbon emission data until 2025. It also disclosed in the agenda notices for its May 1 investment board meeting that it had discovered “significant data and calculation issues” while trying to estimate its 2022 carbon footprint. The use of incompatible and mismatched data led to “inaccurate results”, it wrote.
The move raises questions about similar net zero disclosures by other large asset owners because Calstrs employs a calculation method that has been widely adopted globally, industry experts said. The difficulties could also embolden Republican and business critics who argue it is a waste of time and resources to calculate corporate carbon footprints.
Calstrs, which manages pensions for about 1mn teachers and educators, in 2021 joined a group of large asset owners in pledging to achieve net zero portfolio emissions by at least 2050. As part of that effort, it now seeks to measure the carbon emissions from its assets, which include private and public companies and real estate and infrastructure.
To that end, it calculated how much of each company it owns, and then assumed it was responsible for that share of the company’s reported emissions. The problems arose because the data came from different providers. The stakes were valued at year’s end, but the total company values and the emissions were reported at a range of different times in the year.
For companies that had seen significant movements in their share price values, the date differences substantially altered the results. “Determining our ownership relative to a company’s total value has proven challenging,” it wrote.
The only way to ensure that the data will be accurate, Calstrs said, was to delay each year’s emissions calculations until it could be sure all the data covered the same time period.
Calstrs also noted that it was “challenging” to calculate the carbon emissions from its private equity portfolio given the industry continued to “lag other asset classes” with respect to the availability of data.
Calstrs declined to comment beyond the board agenda and reports.
The question of how best to report carbon emissions has been a fraught one.
Although the US Securities and Exchange Commission last month for the first time required companies to disclose their climate risks, it scaled back the scope of the rule in part because of concerns that the data was not good enough to provide consistent and reliable reports.
BlackRock, the world’s largest asset manager, noted in its 2023 climate-related financial disclosures that it could only provide estimates of the carbon footprint of corporate holdings because of gaps between the date when it measured the group’s holding in a company, and the date that company disclosed its emissions.
“Until we get regulators to impose these mandatory disclosure standards and companies start disclosing audited metrics that can be relied on, this problem is not going to be solved,” said the head of sustainable investing at another large asset manager.
Climate Capital
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