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A Meaningful Earth Day: Thoughts from Our Asset Stewardship Team

Global Co-Head of Asset Stewardship
Global Co-Head of Asset Stewardship

Earth Day reminds us that climate change is one of the most pressing issues of our time, and global carbon emissions continue to challenge us in addressing this concern. Systemic risks such as food insecurity, supply chain issues, and extreme weather have long existed, but climate change has brought them to the surface as urgent issues that threaten our daily quality of life.

It’s similar to the way that the COVID-19 pandemic caused a wide range of systemic risks — including workplace safety, health-care costs, and income inequality — to move from the background of our thoughts to the brightest parts of our consciousness. The urgency around responding to growing climate risks is evident in new regulation, a spike in global net zero commitments, greater calls for climate disclosure from corporations, and a bevy of other developments. But there is much, much work to be done — and rushing to a goal without clear intentionality presents its own risks.

This Earth Day, in a time of significant focus on climate risk, we pause to reflect on our responsibility as the world’s third-largest asset management firm and as a fiduciary. As part of our commitment to holding our portfolio companies and ourselves accountable for reducing carbon emissions, we have announced that we are a signatory of the Net Zero Asset Managers initiative, a syndicate of asset managers that was formed to galvanize the industry to commit to a goal of net zero emissions. This initiative reflects our longtime commitment to considering material risks and opportunities related to climate risk in client portfolios, and to using our position as large shareholders to help companies understand the implications of climate change. Our research shows that integrating fundamental risks surrounding climate change is prudent for investors — especially as companies manage the transition to a low-carbon economy. We believe in using both our voice and our vote to enact change. We aim to create thoughtful progress over time through active engagement with portfolio companies; setting a goal is just the first step.

Systemic risks associated with climate change and a lack of racial and ethnic diversity are our main stewardship priorities for 2021, and we know that setting priorities is a first step toward action. Our 2021 proxy letter from State Street Global Advisors CEO Cyrus Taraporevala details our initiatives on encouraging greater gender and racial diversity disclosure and asking our portfolio companies to use the Task Force on Climate-related Financial Disclosures framework in their climate reporting. We have also launched our Annual Climate Stewardship Review to explain our stewardship approach, which comprises company engagement, proxy voting, thought leadership, and proxy and regulatory efforts.

Earth Day 2021 puts a spotlight on the sweeping changes occurring in sustainable investing. Our celebration of Earth Day is shared across State Street. See further thoughts on Earth Day from State Street Corporation CEO Ron O’Hanley.
 

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