Calstrs to Vote Against Boards of Companies Failing on Diversity

(Bloomberg) — The California State Teachers’ Retirement System will vote against board directors and corporate proposals at companies deemed to have inadequate environmental, social and governance goals.

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Calstrs, the second-largest U.S. pension fund, will oppose entire board slates at firms that don’t have at least one female director during this year’s proxy season, according to a statement Wednesday. It will also vote against directors on a board’s nominating committee if women don’t make up at least 30% of the company’s directors.

The pension fund, which oversaw $318 billion at the end of February, said it intends to support shareholder proposals that demand “meaningful” net-zero actions. The strategy is part of a campaign to pressure corporations to more quickly diversify boardrooms and address climate change, said Calstrs, which has committed to achieving net-zero emissions in its portfolio by 2050 or sooner.

“We are sending a message that corporate directors must meet high standards in the critical areas of board diversity and climate change,” Aeisha Mastagni, portfolio manager of sustainable investment and stewardship strategies at Calstrs, said in the statement. “If necessary, we will support a change in leadership to meet these standards.”

Pension systems are increasingly basing investing decisions on ESG factors, wielding valuable stakes to influence corporate governance. New York’s state pension fund moved last month to sell $238 million of stock and debt of 21 shale oil and gas companies over environmental concerns, and a range of funds have divested Russian assets since the Feb. 24 invasion of Ukraine. Earlier this month, California Governor Gavin Newsom instructed the state’s pensions to use their power to help punish the Russian government.

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Calstrs will also pressure companies to publish reports aligned with the Financial Stability Board’s Task Force on Climate-related Financial Disclosures and to report at least direct and indirect emissions. It will do so by voting against directors of the 1,900 largest global companies if they haven’t published a TCFD report, among other things.

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