Baseline date: December 31, 2019

Baseline performance: 83.43 tC02e/$mn invested (Scopes 1 and 2)

Target year: 2025, 2030

Target(s):

• -22% tCO2e/$mn invested by 2025
• -49% tCO2e/$mn invested by 2030

In addition, BERS expects all our public markets and private markets assets managers to have a net zero goal or science-based targets and implementation plan covering, at a minimum, assets managed for the System, by June 30, 2025.

GHG scopes included: The interim targets cover Scopes 1 and 2 of public equity and corporate bonds including investment grade credit and high yield bonds. BERS will annually measure, assess and report progress in Scope 3 emissions, beginning with 2022 data, with a focus on high emitting sectors and companies where Scope 3 is material.

BERS will measure, report and assess Scope 3 emissions separately for high-emitting sectors including, at a minimum, energy, utilities, materials, industrials and finance. BERS will set interim Scope 3 emissions reduction targets by 2025 as data availability and quality improve.

BERS expects all managers to cover Scopes 1 and 2 emissions and material Scope 3 emissions of underlying investments in their targets and plans.

Asset classes in scope: Listed equity and corporate bonds (including investment grade and high yield). BERS commits to develop and adopt interim GHG emissions reduction targets in private markets, including Private Equity, Real Estate, Infrastructure and Alternative Credit, and will evaluate such targets as private markets emissions data improves.

Methodology/net zero scenarios: The interim targets for 2025 and 2030 are informed by a combination of NZIF-recommended ranges; science-based net zero emission pathways including by IPCC 1.5 ⁰ Celsius scenarios for no and low overshoot; and actual emissions trajectories of the System’s investments. They were also informed by the NZAOA protocol which, in its 3^rd edition, finds that absolute emissions reductions for 2020 to 2025 should range between – 22% to -32% and for 2020 to 2030 between -40% to -60% or more.

Furthermore, IPCC scenarios for 1.5⁰ Celsius pathways demonstrate a rapid acceleration of emissions reductions earlier followed by a gradually reduced rate of emissions reduction. This pacing reflects the decarbonization needed earlier in order to avoid temporary overshoots of 1.5⁰.

In addition, the System’s targets for 100% of its managers across asset classes to have adopted net zero goals or science-based targets with implementation plans by 2025 and 90% of Scopes 1, 2 and 3 financed emissions of public equity and corporate bonds to be covered by science-based targets further support the System’s ability achieve its fair share of global emissions reduction by 2030.

Emissions metrics: BERS will report annual carbon footprint analyses of our public equity and corporate bond portfolios measuring Scopes 1, 2 and 3 financed emissions (emissions/$ million invested) with Enterprise Value Including Cash (“EVIC”). BERS will also measure, evaluate and report changes in absolute emissions and weighted average carbon intensity.

Quantitative target

Baseline: 2022

Baseline performance: While BERS’ climate solutions goal does not depend on a baseline year, as of June 30, 2022, BERS had a total of $200.9 million of invested and unfunded commitments in climate change solutions.

Target years: 2025, 2035

Target: Consistent with fiduciary duties and investment objectives, BERS has a goal of investing:

• $1.8 billion in climate solutions by 2035
• With an interim target of $400 million by 2025

Methodology: Climate change solutions are investments in economic activities that contribute substantially to mitigating, remediation, adaptation and/or resilience in relation to climate change impacts. Such activities include but are not limited to renewable energy, energy efficiency, sustainable water, and pollution prevention.

BERS directs the Bureau of Asset Management (BAM) to periodically review the definitions for climate change solutions investments by asset class to ensure that they accurately reflect investments that are contributing to achieving the goals of the Paris Climate Agreement to keep global warming below 1.5° C. Appendix C of BERS’ Net Zero Implementation Plan provides complete definitions of climate solutions investments. The precise definitions vary based on asset class and external data provider.

After approval of the Implementation Plan, the accounting of climate solutions in public equity and public fixed income has been updated from counting 100% of investments in companies deriving 50% or more revenue from climate solutions to counting the investments in all companies deriving any revenue from climate solutions in proportion to the percentage of each company’s revenue from climate solutions.

Development of the climate solutions targets were informed by current amounts and historical trajectories of climate solutions investments in BERS’ portfolio and long-term projections of overall portfolio growth.

Baseline: As of June 30, 2022, approximately 16% of BERS’ Scopes 1 and 2 financed emissions in public equity and corporate bonds were attributed to companies with SBTi-approved targets.

BERS has currently set targets for companies in its public equity and corporate bond portfolios to adopt science-based targets (SBTs). Adoption of SBTs is a partial indicator of “aligning” status.

BERS continues to explore data, tools, and methodologies for further assessing the net zero alignment of portfolio companies based on whether their plans and capital expenditures are aligned to achieving 1.5⁰ C.

Target year: 2025, 2030

Target:

• By 2025 companies representing 70% of Scopes 1 and 2 financed emissions in our public equity and corporate bond portfolios, and
• By 2030 companies representing 90% of Scopes 1, 2 and 3 financed emissions in those portfolios will have adopted science-based targets, to be approved by SBTi or otherwise independently verified with globally established science-based standards.

Asset classes in scope: Public equity and corporate bonds (including investment grade and high yield)

Data sources: Listed equity & corporate bonds: SBTi and MSCI.

BERS will continue to explore data, tools and methodologies for further assessing the net zero alignment of portfolio companies including Climate Action 100+ and the Transition Pathway Initiative.

Target: As of June 30, 2023, the companies targeted for engagement comprise approximately 55.7% of the Scope 1 and 2 financed emissions of the public equity and corporate bonds portfolio.

Approach: To focus resources efficiently toward engagement, BERS directs BAM to prioritize identifying and engaging high-emitting corporate portfolio companies in the Russell 1000 and the ACWI World- ex USA IMI, and the largest portfolio companies by market capitalization in the MSCI Emerging Markets indices in the highest emitting sectors.

These sectors shall include, at a minimum, energy, utilities, industrials and materials, as the highest emitting sectors of portfolio Scopes 1 and 2 emissions and the financial sector, as a high source of Scope 3 emissions. BERS will engage the highest emitting companies without SBTs in its public equity and corporate bonds portfolios to encourage adoption of SBTs and seek fulfilment of its targets.