Published on Monday, May 6, 2024
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CalSTRS' problem suggests that CRE owners may have issues nailing down data from their tenants.
Greenhouse gas and carbon emissions reporting for corporations is only getting more demanding because of demands from investors and national regulators. And when tenants need accurate data, CRE property owners had better produce.
But an ongoing experience by CalSTRS — the California State Teachers’ Retirement System, which is the largest teachers’ retirement fund and second-largest pension in the U.S. — shows how tricky this could become.
The organization noted on May 1 that it was facing “challenges” in trying to calculate its emissions.
CalSTRS takes a basic approach. If it owns X% of a company, it assign X% of the company’s emissions to its portfolio. Add the parts and that should result in a reasonable representation of emissions.
Except, they noted that determining ownership relative to a company’s market value is not straightforward.
“CalSTRS’ ownership levels are calculated at calendar year end using information provided by our custodian, State Street Bank,” they wrote. “They provide us the market value of our equity shares and debt holdings for each publicly traded company we own. We then rely on a third-party data service provider to give us the total equity and debt value for each company we own, as of the same valuation date.”
In reviewing 2022 data, CalSTRS staff found that the equity and debt values didn’t match the portfolio market values that State Street had provided on a timely end-year basis. However, the data service provider needed to get the matching information from the companies in the portfolio, and those companies were sending the data over at varying times during the next year.
Things clearly didn’t match up on a timely basis, “strongly influencing emissions calculations and yielding inaccurate results.”
CalSTRS talked to multiple data providers as well as investment peers and partners. The conclusion was a workaround was impossible. Getting accurate and timely data wasn’t going to happen.
So, the pension decided the only possible way to address the issue was to delay emissions reporting. That means, the 2023 report won’t come out until 2025. “Going forward, considering the recent SEC climate disclosure rule and the growing acceptance of the International Sustainability Standards Board’s (ISSB) climate disclosure guidance, staff anticipates more robust and timely corporate emissions disclosure that will result in more meaningful emissions measurement,” they wrote.
As the Financial Times noted, this raises questions about the accuracy of disclosures, and net-zero goals, by many large asset owners.
“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 business disclosed its emissions,” the paper wrote.
This could mean more pressure on CRE owners to get data in to their tenants faster.