Proxy advisor firms provide independent third-party research on company annual meeting ballots and technological platforms that streamline the voting process. Recently, proxy advisors have come under scrutiny by state and federal regulators and lawmakers and have been targeted by legislation, regulation, legal action and executive orders. Critics claim proxy advisors wield undue influence in voting outcomes at company meetings, give politically motivated vote recommendations and facilitate collusive behavior.

In CalSTRS’ view, proxy advisors have an important role in the proxy ecosystem and treat proxy votes as plan assets and votes all shares in alignment with the CalSTRS Corporate Governance Principles. In the 2024-25 fiscal year, CalSTRS voted on 101,972 items at 10,875 portfolio company meetings. Proxy advisor research acts as an important supplement to CalSTRS staff expert analysis. Staff use this research, in addition to information from the company and other industry sources, to make informed voting decisions. The technological platforms offered by proxy advisors allow investors to efficiently vote proxies. This operational efficiency is crucial as staff sometimes vote for more than 100 company proxies in a single day. Proxy advisors enable investors to build highly customized voting policies tailored to each investor’s corporate governance beliefs and principles.

CalSTRS is engaging lawmakers and regulators to improve the understanding of the proxy voting process and the value of proxy advisor services. This includes direct meetings with lawmakers and their staff, responses to regulatory solicitations and collaboration with other investors when interests are aligned. For example, CalSTRS  joined an amicus brief in early 2025, successfully supporting proxy advisors in litigation. CalSTRS is committed to using its influence to protect shareholder rights, including proxy voting, for the long-term interests of the fund.

SASB Standards update

CalSTRS submitted an investor response to the IFRS Foundation’s International Sustainability Standards Board consultation survey on amendments to the Sustainable Accounting Standards Board Standards. The SASB Standards are industry-specific sustainability disclosure standards intended to guide companies on sustainability topics and metrics most likely to be financially material to investors. There have been minimal updates to the standards, which were published in 2018 and cover 77 industries.

CalSTRS’ response covered proposed updates for all industries falling under the extractives and minerals processing sector and the processed foods industry, including new or updated metrics spanning climate, nature and biodiversity and human capital. CalSTRS also shared input on targeted metrics across 41 additional industries, including water management and workforce health and safety. 

This will improve the usefulness and comparability of industry-specific metrics on sustainability related risks and opportunities, enabling investors to make more informed decisions.

Building industry influence

During the past quarter, CalSTRS staff attended multiple events aimed at building working relationships with senior company executives and fellow investors. Attendance at these events allows direct access to decisionmakers who can shape corporate behavior. Major events that took place during the quarter include:

• Barclays 11th Annual Eat, Sleep, Play, Shop Conference: Staff met with management teams from 12 companies across the food service, hospitality and gaming industries. Topics discussed included responsible AI deployment and governance, and building sustainable and resilient workforces.
• Baird Industrials Conference: Staff met with 17 companies across the industrials, aerospace, transportation and materials industries. Key issues were employee retention and technology impact on the workforce, and decarbonization consistent with CalSTRS’ ambition of a net zero portfolio by 2050 or sooner.

CalSTRS uses industry events to gain access to company executives and build expertise across a diverse array of industries and to influence corporate behavior in alignment with CalSTRS Stewardship Priorities.

Phillips 66 refinery closure

The decision to close its Los Angeles refinery represents a strategic pivot addressing both economic realities and environmental commitments of the company. Phillips 66 is a multinational energy company that CalSTRS leads engagement with through Climate Action 100+, an investor-led initiative focused on engaging companies to manage climate-related financial risk.  

The business case

The decision to close the 139,000-barrel-per-day facility was driven by market shifts that challenged its long-term viability. West Coast refining profit margins deteriorated significantly throughout 2024, reaching a five-year low and signaling structural challenges rather than temporary market fluctuations. California's evolving fuel landscape created additional headwinds. While gasoline demand remains strong and California ranks second nationally in consumption, the state's strong renewable diesel adoption has weakened petroleum diesel markets. This creates an operational challenge for refiners who must produce multiple fuel types from each barrel of crude oil, yet some products face shrinking demand and smaller margins. Phillips 66 recognized that maintaining operations under these conditions would undermine shareholder value.

Environmental and community benefits

The closure delivers tangible environmental improvements for surrounding communities. Residents of nearby Wilmington and Carson will experience improved air quality as emissions from refining operations cease. The company committed approximately $70 million for groundwater remediation, demonstrating accountability for historical impacts.

The 650-acre site redevelopment will transform the industrial infrastructure into mixed-use space featuring retail, recreational facilities and modern industrial operations. Plans include 27 acres of sports fields and green space—a dramatic shift from storage tanks and processing units.

Operational transition and supply continuity

Phillips 66 executed a methodical shutdown through late 2025, with final crude oil processing in mid-October. The company addressed California's fuel supply concerns by committing to source gasoline from within and outside its refining network, supplemented by renewable diesel and sustainable aviation fuel from its Rodeo Renewable Energy Complex.

This approach demonstrates that sustainability goals need not compromise energy security. By pivoting from in-state refining to strategic sourcing, Phillips 66 maintains market presence while reducing its carbon footprint.

Strategic alignment

For CalSTRS, this closure exemplifies how sustained engagement can influence corporate behavior toward sustainable practices. The decision reflects management's recognition that long-term value creation requires adapting to regulatory environments, market dynamics and stakeholder expectations around climate risk. By exiting an economically challenged operation, remediating environmental impacts and repurposing valuable real estate, Phillips 66 advances both shareholder interests and community well-being—the outcome CalSTRS' Climate Action 100+ engagement seeks to achieve.