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CalSTRS CIO Chris Ailman says energy transition is a Maverick wave coming

Photo illustration of Chris Ailman surrounded by abstract shapes.

Christopher Ailman. Photo illustration: Gabriella Turrisi/Axios. Photo: Courtesy of CalSTRS

The energy transition is a mega wave that will dominate the investment landscape for the next 15 years, says Christopher Ailman, the soon-to-retire Chief Investment Officer for the California State Teachers' Retirement System.

Why it matters: Ailman has helped lead CalSTRS, the second-largest U.S. pension fund, for more than two decades, helping its money managers incorporate climate risk.

Driving the news: Earlier this month, Ailman announced his plan to retire from the $327 billion fund at the end of June. He'll advise the new CIO until the end of 2024.

  • After that, Ailman tells Axios said he plans to work on helping money managers and investment firms in their efforts to integrate ESG and climate change into their portfolios.
  • That's because he sees the energy transition as the "preeminent megatrend," bigger than changing demographics or urbanization, "or any of the other megatrends we're currently seeing," said Ailman.
  • Ailman likened the energy transition to a Maverick wave rising, which money managers need to paddle fast to, and where "timing is critical."

Zoom in: While ESG has become a politicized term, Ailman says he sees it just as long-term risk for companies.

  • In five to 10 years, "you're going to want to know the emissions data and where it's heading for a company, almost as much as you'll need to know its earnings-per-share data," Ailman tells Axios.
  • "There needs to be better data," he adds, noting that too much emissions data is estimated. While he applauds California's recently passed carbon disclosure law, he says "I need global disclosure standards."
  • On the political pushback against ESG, Ailman said he didn't think it resonated with voters, pointing to Ron DeSantis — who's been aggressively anti-ESG — dropping out of the presidential election on Sunday.

Of note: For Ailman, his attention to the energy transition is personal, he says, after worrying about what the planet would be like for his grandchildren.

Big picture: With California and Europe moving toward mandatory greenhouse gas emission disclosures, and the U.S. SEC set to weigh in soon, companies will need to figure out how to collect and report that data.

  • At the same time, money managers will need to learn how to grow their skills around analyzing energy, resources and greenhouse gas emissions info.
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