Managing and reducing greenhouse gas emissions

The first pillar of our net zero strategy is managing and reducing portfolio emissions, which are the greenhouse gases emitted by the companies and assets we invest in on behalf of California’s public educators. We do this by using science-based tools to measure emissions in our portfolio. Our goal is to align our emissions reductions with the Paris Climate Agreement. We report these measurements regularly and use them to inform our investment decisions and our priorities for influencing companies and policy makers.

We will continue to focus on stewardship and engagement efforts and investing in climate solutions that will further reduce greenhouse gas emissions and risks related to our portfolio.

Recent activities

The Global Equity team implemented an emissions reduction strategy by allocating 20% of the Total Public Equity portfolio to a low-carbon index, approved at the September 2022 Investment Committee meeting. As of December 31, 2025, approximately $32.8 billion or 20% of the portfolio is being managed internally against the low-carbon index. Staff estimates this has yielded portfolio emissions reductions of approximately 20%.

The Fixed Income team implemented an emissions reduction program through an initial 15% carbon reduction strategy, approved by the Teachers' Retirement Board at the May 2023 Investment Committee meeting. In this strategy, Fixed Income’s credit-related indices reduce carbon emissions incrementally each month while seeking to maintain parent index metrics and minimizing additional active risk. At the same time, Fixed Income’s credit-related portfolios reduce emissions in like fashion.

Speeding up the transition

One of the three components of CalSTRS pledge to reach net zero portfolio emissions by 2050, or sooner, is to use our influence to accelerate the transition to manage risks in our portfolio. Climate change presents a material and significant risk to society, the economy and our portfolio. CalSTRS is committed to engaging the highest carbon emitting companies to reduce emissions in the global economy. This is aligned with CalSTRS pledge to achieve net zero portfolio emissions by 2050, or sooner.

Recent activities

Entering the 2026 proxy season, we continue to focus on our Stewardship Priorities: corporate and market accountability, net zero, and workforce and communities. These priorities, established once every three years by the Teachers' Retirement Board, were selected to mitigate risk, protect plan assets and drive sustainability through systemic market change. They guide our engagement work, including proxy voting. Our priorities have a long-term focus and are meant to transcend shorter term trends and developments. We believe that our Stewardship Priorities are areas where we can meaningfully influence and deliver measurable outcomes that support long-term performance of the CalSTRS Investment Portfolio and protect our members' retirement benefits.

Investing in climate solutions

We focus on investing in companies and assets that meet our investment return objectives and reduce portfolio emissions, such as producing renewable energy or constructing and managing buildings that meet the highest standards for energy efficiency.      

Since 2004, we have been actively integrating climate-oriented solutions into our portfolio and have invested more than $55.1 billion in low-carbon solutions.

Recent activities

The SISS Private Portfolio, which was approved by the Investment Committee in 2021 to create a systematic platform to expand investments in low-carbon solutions, has deployed over $5.5 billion as of December 31, 2025 across a broad risk-return spectrum.

The private asset classes have been working to increase exposure to low-carbon solutions. Examples of these types of efforts include:

• We invested in a large renewables platform with a diversified portfolio of operating and under-construction assets across North America.
• Real Estate's solar decarbonization strategy continues to be an important component of our strategy to reduce CO2 emissions across the portfolio. Beginning in 2024, staff engaged a global solar and infrastructure consultant to develop a plan to assess and implement solar opportunities across the Real Estate portfolio. As part of this project, various solar business models and opportunities were explored in collaboration with potential solar partners.In late 2024 and 2025, CalSTRS implemented the second phase of this solar strategy. This second phase included data collection and feasibility analyses on a representative subset of the Real Estate portfolios. The second phase work is expected to culminate in solar implementation across a subset of the analyzed assets, where it has been deemed accretive to expected portfolio returns.In early 2026, staff adopted a more robust solar project evaluation process. This will prioritize solar use cases to optimize feasibility and enable project evaluation at multiple points across the development lifecycle. This stage-based approval process fast tracks mature use cases (e.g., community solar), allows for feasibility studies for complex use cases, as well as early screening for potential acquisitions.
• We invested in a company that is pioneering next-generation Enhanced Geothermal Systems (EGS) to deliver clean, firm, 24/7 electricity at scale. By applying proven oil and gas drilling technology to geothermal energy, the company eliminates the dry-hole risk and geographic limitations of traditional geothermal, producing power with zero operational carbon emissions and non-consumptive water use. The company holds over 500,000 acres of geothermal leases across the western U.S., representing more than 60 gigawatts of clean energy potential, and has secured long-term power agreements with major utilities and technology companies. Geothermal energy is one of the only clean, always-on power sources available at scale this decade, making it a critical tool in the global transition away from fossil fuels.
• We invested in a pioneering biotechnology company that develops RNA-based solutions to replace harmful synthetic pesticides in agriculture. The company's products target specific crop pests with surgical precision, leaving no chemical residue on food and avoiding the broad environmental damage caused by conventional chemicals. Its flagship product is the world's first RNA biopesticide to receive EPA approval, offering farmers comparable efficacy to traditional pesticides while protecting soil health, water quality and biodiversity. By displacing synthetic pesticides at scale, the company has the potential to avoid an estimated 11 million metric tons of CO2 equivalent emissions over 15 years, while supporting healthier ecosystems across millions of acres of farmland globally.
• We invested in a company building the world's most capable constellation of small satellites designed to deliver real-time climate and weather intelligence. Existing satellite systems collect limited data types and lack the resolution needed to predict and respond to climate-driven disasters such as wildfires, droughts and extreme weather events. This company's constellation gathers five times more types of climate data at ten times higher resolution than any existing system, enabling governments, businesses and communities to take meaningful, data-driven action on climate change. Better climate data is foundational to adaptation and resilience, and this platform addresses some of the most critical information gaps in our understanding of the Earth's rapidly changing systems.