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Responsible Investing

Rising to the challenge: 2023 TIAA Climate Report

Aerial shot of the California Aqueduct curving between a barren hillside and lush agricultural fields near Mettler in Kern County, California at sunset.

A message from TIAA

TIAA has looked after the financial futures of millions of savers and investors for over a century. We've managed through numerous challenges over those decades—including economic booms and busts—with a steady hand, always with clients at the forefront of our decision-making.  

We believe that one of the major challenges of our time is the changing climate. While many have already felt the physical changes in temperatures and weather patterns, flooding, heatwaves, droughts and fires, we also know that the changing climate is transforming industries, complicating supply chains, and driving macroeconomic trends that affect profitability and business models. We recognize that climate change affects our investment portfolios and the methodologies we use to achieve our clients’ investment objectives. 

Executing our fiduciary duty to manage our clients’ investments requires a holistic understanding of the implications of a changing climate and how they may impact the growth prospects and values of issuers and assets in which we invest. As stewards of our clients’ financial futures, we must face the challenge and guide our clients’ investments through the transition to a net zero greenhouse gas (GHG) emission economy. 

TIAA’s focus during the low-carbon transition is our own operations and the portfolios that we manage, and we believe that reaching a net zero carbon world is essential to our long-term success. We support the Task Force on Climate-Related Financial Disclosure (TCFD) and support its focus on transition plans. We continually review our disclosures for areas where we can provide more information and transparency and will evolve this report over time based on data availability and industry standards.  

We are proud of our progress so far, and we hope that global businesses and governments will continue to join us in facing this generational challenge head on. Together, we believe we can achieve better outcomes for our clients and the future of our climate. 

Strategy

Climate beliefs of the TIAA General Account

Our obligation to TIAA retirement plan participants is long term, which means it is our responsibility to consider investment risks, including climate risks, over a similarly long horizon. The scientific findings from the Intergovernmental Panel on Climate Change (IPCC) suggest that physical impact of unmitigated climate change will result in global economic damage over time, with damage increasing as warming increases. Therefore, we believe the transition to a low-carbon economy is an economic imperative. Furthermore, an orderly transition within the 2050 timeframe set out in the Paris Agreement is likely to deliver better economic and investment outcomes than a disorderly or delayed transition.  

The following TIAA belief statements have been developed and subsequently updated with this scientific and economic context in mind. 

Risk Management

TIAA’s climate risk management framework 

Climate risks are multi-faceted and must be identified and monitored through different lenses across the organization. TIAA began a phased buildout of our enhanced climate risk management framework in 2022, a map of processes that will help us take a consistent approach to how we invest, adhere to existing and evolving regulations, operate our business efficiently and represent ourselves in the fast-changing world. Our Climate Risk Management Framework will help us take appropriate actions and develop strategies for mitigating and managing the effects of climate change on behalf of our clients.  

Below are the four key pieces of the climate risk management framework:

  1. Oversight – The Board, and Boards of our affiliates, are responsible for understanding relevant climate risks and overseeing their management within the overall business strategy and risk appetite.  
  2. Risk assessment – Development of processes to report material climate risks, their transmission channels and their potential impact on existing risk factors and overall risk appetite.  
  3. Monitoring – Incorporation of assessments, including time horizons, that allow us to appropriately inform TIAA’s business activities and decision-making.   
  4. Scenario analysis – Use of scenario analysis to understand how climate risks may materialize and measure potential impacts.  

Metrics and targets

TIAA is committed to reducing carbon emissions and we have set net zero goals for our own operations (2040), assets managed by Nuveen Real Estate (2040), and assets managed in the GA (2050). We will continue to share annual progress reports on these commitments.

Tracking progress

Operational emissions: Net zero by 2040  

TIAA Global Corporate Services reports on Scope 1, 2 and a portion of Scope 3 emissions. The Scope 3 categories include business travel, employee commuting, waste and water-related emissions.1 While our overall operational emissions increased in 2022 from the previous two years, they show a 27% reduction when compared to the 2019 baseline. We see the increase in our 2022 GHG emissions compared with 2020 and 2021 as anomalous due to the temporary reduction of emissions from the global pandemic resulting in reduced business, travel and related activities during those previous two years. 

Chart 1: Our emissions impact — Total GHG emissions (tonnes CO2)

The General Account: Net zero by 2050

TIAA announced its net zero by 2050 commitment for the GA in 2021, driven by the belief that climate risk is investment risk. 

The initial phase of our journey to net zero by 2050 will prioritize assets where data is readily available and reasonably accurate, therefore our interim targets are set for the public corporate bond portfolio and directly owned commercial real estate — these together account for roughly 30% of the GA’s assets.3 Inconsistent emissions disclosure and carbon accounting standards prevent the full and accurate measurement of the carbon footprint associated with the remaining 70% of diversified assets and securities held by the GA. As disclosure improves and carbon accounting best practices expand across asset classes, we will expand our interim targets accordingly. More asset classes are being targeted for 2024 and 2025 as the path toward gathering the data needed for measurement and interim target setting becomes clearer. 

Chart 2: Our 2025 interim targets for each asset class

TIAA’s fossil fuel exposure

Fossil fuels currently make up over 80% of the world’s primary energy supply and are likely to meet a significant portion of global energy needs for decades to come. TIAA and Nuveen’s exposure to fossil fuel-related investments reflects their widespread past and current role in the real economy. Increasingly, the low-carbon transition is likely to bring major shifts in the energy system. We will continue to monitor these shifts, seeking to balance investment risk and return within our clients’ investment objectives as they unfold.

As a matter of policy, we do not completely divest from major sectors of the economy, including the energy sector. Divestment is a blunt tool that does little to reduce real world GHG emissions and removes our ability to engage with companies and assets over time. We have a long history of stewardship and engagement, with particular focus on the theme of climate change. Our engagement approach is informed by the growing recognition that portfolio-level climate targets are most impactful when they are achieved via real world emissions reductions, not simply by reweighting our portfolio holdings.

However, this does not mean we will blindly hold an investment without regard for changing market conditions.  Our investment process is both dynamic and climate-aware, reflecting our investment teams’ careful balance of risk and return as well as climate-related data and training curated by the Responsible Investing and Risk teams.

Transparency is a key part of our commitment to responsible investing. To that end, we are disclosing our fossil fuel exposure in this report for the first time. The below figures contain TIAA, Nuveen, and all affiliates’ exposure to fossil fuels (in millions) as of year-end 2022. 

Chart 3: TIAA’s fossil fuel exposure

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1 We will look to report Scope 3 emissions from investment activity in future reports as data quality and availability improves. 
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