Stanford-Led Advisory Group Delivers First-Ever Report on Climate-Related Financial Disclosure Practices for the State of California

Report Addresses Climate Change Investment Risks and Opportunities Created by Resilience Efforts and Emergence of New Technologies

Today, the Stanford Sustainable Finance Initiative, a group of 20 global energy and finance experts, and Stanford Law School’s (SLS) Steyer-Taylor Center for Energy Policy and Finance issued a groundbreaking report on how California can further its financial policy leadership to address the growing challenges posed by climate change. The advisory group, established by Governor Gavin Newsom to leverage the state’s investment portfolio to advance California’s climate leadership, delivered more than 45 infrastructure and financial disclosure recommendations focused on the state’s $262 billion operating budget and the combined $1 trillion in assets under management across the state’s three biggest pension funds. In addition to sharing the report with California state entities, the advisory group is providing briefings to other state and federal policy makers tasked with translating climate risk into financial decision-making. Stanford will host a public event later this fall to discuss the work and to help facilitate implementation of the key recommendations. 

Alicia Seiger 1

“This report details how to practice climate risk disclosure in line with leading standards, the ways in which disclosure needs to evolve, and how disclosure fits into a comprehensive suite of climate policies,” said Alicia Seiger, Co-Chair of the Advisory Group and Managing Director of the Stanford Sustainable Finance Initiative and the Steyer-Taylor Center for Energy Policy and Finance at SLS. “The recommendations are particularly relevant in anticipation of the Federal government’s infrastructure package and as the Securities and Exchange Commission contemplates its climate disclosure rulemaking.” 

Climate Investment Framework

In 2020, Governor Newsom called for this external Advisory Group on Climate Risk Disclosure to build the state’s capability to assess and manage climate risk. The request was linked to Governor Newsom’s Executive Order N-19-19, signed in 2019, calling for the California Department of Finance to collaborate with the state pensions to build a “Climate Investment Framework.” This framework was developed to align portfolio investment with the state’s climate leadership and to facilitate the alignment of direct expenditures by the state’s main agencies with the state’s climate goals. 

Stanford-Led Advisory Group Deliver First-Ever Report on Climate-Related Financial Disclosure Practices for the State of California

The advisory group was comprised of leaders with deep expertise in infrastructure, economics, finance, accounting, banking, business, insurance, and portfolio management. Members included Mary Obasi, a Bank of America Global Climate Risk Executive, Carlos Sanchez, Director of Climate Resilient Investment at Willis Towers Watson, Nili Gilbert, Investment Committee Chair at the Rockefeller Foundation, Laura D’Andrea Tyson, who chaired the President’s Council of Economic Advisors from 1993 to 1995, and Dave Jones, Director of the Climate Risk Initiative at UC Berkeley. The advisory group worked in consultation with a roughly 20-person steering committee made up of leaders from the state’s constitutional agencies and offices as well as the three biggest pensions (CalPERS, CalSTRS and UC Regents).

“California has always been a leader in difficult policy areas. Dealing with the effects of climate change is no exception,” said California State Treasurer Fiona Ma. “The report captures and identifies very well the issues that must be considered in a world that is increasingly focused on the financial risks of climate change on the global markets. The thoughtful discussions and deliberations of the Advisory Group will be a useful roadmap as we move forward with identifying those risks. By tackling these difficult issues now, the Advisory Group is doing what fixed income investors, in particular, are increasingly urging because of the significant overlap in objectives between investment grade assets and the financial system’s response to the growing climate crisis. I commend the leadership and the commitment of this Administration to face this challenge head on by engaging in this issue with the Advisory Group.” 

“CalPERS welcomes the report on climate risk disclosure practices for the state,” said Marcie Frost, CEO, CalPERS.As a fiduciary for our two million members we understand the vital importance of integrating climate change into our consideration of risk and return in the portfolio. CalPERS has developed a sustainable investment strategy focused on advocacy with policy makers, engagement with companies and integration into our decisions around capital allocation and stewardship. Partnership is the foundation of our strategy and this is where California leads. Policy makers, civil society and investors need to work together to tackle the climate crisis. Together, we can protect our members’ assets and ensure a sustainable future. The California report provides the call to action in the Golden State.”

Thomas Heller 1

“True to its leading role in climate action, California is now exploring how emissions disclosure can add to the toolkit already in place to better align policy and investment decisions with an orderly, just and productive transition to a low carbon economy,” said SLS Professor Thomas Heller, Faculty Director, Stanford-Steyer Taylor Center for Energy and Finance at SLS. “While no simple task to build up a complementary portfolio of public and private institutions that add up to this goal, this thoughtful report about both where leading disclosure practice stands and the ground it still needs to cover will mark a substantial and influential step in the right direction.” 

The advisory group recommended the state establish a continuing process to coordinate disclosure efforts across state entities. With regard to direct expenditures out of the state’s general fund, key recommendations included the establishment of a classification system to prioritize disclosure requirements, technical assistance for small businesses, corporate and project-level disclosures for infrastructure bids and the alignment of transition and physical risk data and scenarios with the state’s existing programs. In considering the actions for financial portfolios, the advisory group offered 24 recommendations across governance, strategy, risk management and metrics and targets – giving investors more specific guidance previously published reports.    

As states, countries, businesses and investors Race to Zero in the lead-up to COP26, disclosure has emerged as a primary tool for enabling fulfillment of net zero greenhouse gas emissions pledges. “Without necessary climate-related projections – such as emissions trajectories, transition pathways, and scenario analysis – investors may be lulled into a false sense of security by assuming that the future of climate risk will be similar to the past,” said Nili Gilbert, Investment Committee Chair, David Rockefeller Fund, and advisory group member. “With unprecedented levels of physical climate impacts already here and the urgent need to transition to a zero-carbon economy, investors need a better understanding of the evolving environment in which we are operating. Following the recommendations in this report will go a long way in helping investors better price risky assets and identify well-managed companies.” Gilbert also serves as Chair of the U.N. Net-Zero Asset owner Alliance. 

Full list of advisory group members:

  • Marla Bleavins, Deputy Executive Director & Chief Financial Officer, Port of Los Angeles
  • Kathleen L Brown, Former State Treasurer, California State Treasury
  • Chris Costello, Director, Environmental Market Solutions Lab at UC Santa Barbara’s Bren School
  • Dr. Craig Davies, Associate Director for Green Economy and Climate Action, European Bank for Reconstruction and Development
  • Jib Ellison, Founder and Chief Executive Officer, Blu Skye  
  • Nili Gilbert, Board Member and Chair of the Investment Committee, David Rockefeller Fund
  • Janine Guillot, Chief Executive Officer, Sustainability Accounting Standards Board (SASB) (Now the Value Reporting Foundation)
  • Thomas Heller, Faculty Director, Stanford Steyer-Taylor Center for Energy Policy and Finance
  • Dan Iancu, Associate Professor of Operations, Information and Technology, Stanford Graduate School of Business (GSB)
  • Scott Jacobs, Co-Founder and Chief Executive Officer, Generate Capital
  • Dave Jones, Director, Climate Risk Initiative at UC Berkeley’s Center for Law, Energy and the Environment (CLEE)
  • Mary Obasi, Global Climate Risk Executive in Global Risk Management, Bank of America
  • Tim Profeta, Director, Nicholas Institute for Environmental Policy Solutions at Duke University
  • Carlos Sanchez, Director of Climate Resilience Investment, Willis Towers Watson
  • Lynn Schenk, Director, Business and Environment Initiative at Harvard Business School
  • Alicia Seiger, Managing Director, Stanford Sustainable Finance Initiative and Steyer-Taylor Center for Energy Policy and Finance
  • The Rev. Kirsten Spalding, Senior Program Director, Ceres
  • Laura D’Andrea Tyson, Distinguished Professor, Haas School of Business of the University of California Berkeley
  • Marilyn Waite, Program Officer in Environment, William and Flora Hewlett Foundation
  • Bill Weil, Program Strategist, Tempest Advisors

About the Steyer-Taylor Center for Energy Policy and Finance

The Steyer-Taylor Center for Energy Policy and Finance is an interdisciplinary initiative of Stanford Law School and the Graduate School of Business to study and advance the development and deployment of clean-energy technologies through innovative policies and financial mechanisms. Paul Brest, Former Dean and Professor Emeritus (active) of Stanford Law School, is the center’s interim executive director and Professor Thomas Heller is the center’s faculty director. Alicia Seiger serves as the center’s managing director.

About Stanford Law School

Stanford Law School is one of the nation’s leading institutions for legal scholarship and education. Its alumni are among the most influential decision makers in law, politics, business and high technology. Faculty members argue before the Supreme Court, testify before Congress, produce outstanding legal scholarship and empirical analysis, and contribute regularly to the nation’s press as legal and policy experts. Stanford Law School has established a new model for legal education that provides rigorous interdisciplinary training, hands-on experience, global expertise, global perspective and focus on public service, spearheading a movement for change.