CalSTRS is Lead Investor on Energy Productivity Index for Companies Project

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Project aims to drive companies to improve energy productivity

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Brian Rice, CalSTRS Portfolio Manager

Improving energy productivity is a business tactic with growing importance. It is associated with mitigating carbon pollution– which in turn reduces business risk. Brian Rice, CalSTRS Portfolio Manager in Corporate Governance

The California State Teachers’ Retirement System today announced their involvement with the Energy Productivity Index for Companies, a new project that will establish the first global energy productivity benchmark for listed industrial companies. The project was officially launched today in New York.

The project is a partnership between CalSTRS, ClimateWorks Australia and the US-based ClimateWorks Foundation. CalSTRS is participating in the project as lead investor, providing valuable industry knowledge as well as a portfolio of companies to demonstrate the analysis and engagement methodology.

CalSTRS Portfolio Manager, Corporate Governance, Brian Rice said, “Improving energy productivity is a business tactic with growing importance. It is associated with mitigating carbon pollution– which in turn reduces business risk. The project will demonstrate the process investors need to implement to identify and engage with companies and succeed in improving energy productivity performance.”

ClimateWorks Australia Head of Research, Amandine Denis said the Energy Productivity Index for Companies project would quantify energy risks and the financial value of improving energy productivity for companies involved in the analysis.

“The project will provide investment funds with a greater understanding of energy-related issues in their portfolios and drive companies to improve their energy performance,” she said.

Ms Denis said investors often could not access the information necessary to help them assess the energy risks faced by companies. Many investors also want to be able to assess the financial benefits that energy productivity can deliver these companies in their portfolio.

“This project will help equip investors with evidence-based information crucial to conducting meaningful engagement with companies on this topic. It will also build an energy risk profile for selected industry sectors and highlight the differences between companies within each sector,” she said.

“A company’s energy performance will be assessed in terms of their revenue or production levels per unit of energy used. Other factors such as exposure to energy risks and potential financial uplift will be considered as part of the benchmark. “The project will also demonstrate the financial savings available from improving energy productivity performance. Preliminary results show that improved energy efficiency performance could deliver between 2% and 10% annual increase on a company’s profit (measured through EBIT, which is Earnings before Interest and Tax).”

ClimateWorks Foundation Program Director, Dan Hamza-Goodacre said, “Globally productivity is a major threat to economic growth, jobs and quality of life. Energy productivity can help mitigate this threat. However, investors need more information about available opportunities and to realise the market value potential, they must engage with businesses to ensure risk mitigation measures are adopted.

“The project will draw on global data from the Carbon Disclosure Project (CDP) to establish a benchmark for energy productivity performance. It will compare listed companies’ energy performance in recent years and compare this with a best practice benchmark performance to highlight further potential for improvement,” he said.

The California State Teachers’ Retirement System, with a portfolio valued at $184 billion as of August 31, 2015, is the largest educator-only pension fund in the world. CalSTRS administers a hybrid retirement system, consisting of traditional defined benefit, cash balance and voluntary defined contribution plans. CalSTRS also provides disability and survivor benefits. CalSTRS serves California's 879,000 public school educators and their families from the state’s 1,700 school districts, county offices of education and community college districts. Follow us on Twitter @CalSTRS

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