The climate crisis is one of the foremost challenges facing our society. We are already seeing the effects on our daily lives, ranging from intensifying wildfires to more frequent flooding along coasts and rivers. These climate events affect us all, including our clients and the communities in which they work and live. As part of our efforts to help mitigate this crisis, TIAA has made a bold commitment to Net Zero by 2050 by reducing carbon emissions in our investments in the TIAA General Account, which holds ~$300B in assets that supports the firm’s flagship TIAA Traditional annuity.

Establishing climate risk beliefs clarified our objectives

We believe that climate risk is investment risk, so managing climate risk is critical to delivering returns that provide guaranteed lifetime income for retirees. In order to effectively manage this risk, we developed a set of supporting beliefs that have guided our decision-making. Crucially, these climate risk beliefs establish our view that our Net Zero efforts are focused on managing the impact of climate risk on our investments, while also providing positive benefits for the environment.  Our beliefs include:

Progress against Net Zero requires a long-term mindset

Currently, climate change isn’t definitively priced in capital markets. We are dealing with a complex and relatively unknown set of risks without much historical precedent, which makes it difficult to model as we would with other risks. As a result, we must take a long-term view that allows short-term flexibility in our approach to implementing Net Zero.

The General Account’s strategic asset allocation process is built around allowing us to adapt and manage through different market environments over time. Setting a long-term carbon target, aligned with the current science and the global Paris Agreement, with flexible interim targets allows us to do the same. As the world acts and reacts to climate change, we want to be able to create resilient portfolios that will be able to deliver risk-adjusted returns over many different scenarios, not a portfolio optimized for a specific set of circumstances.

We are also committed to transparency, and published our first TIAA Climate Report in December 2021.  Going forward, we expect to share our pathway toward Net Zero in subsequent communications, including publishing our short-term interim targets and demonstrating progress against them.