The board of the $24 billion San Francisco Employees’ Retirement System (SFERS) has approved a watered-down plan to divest from fossil fuel companies that are the “worst of the worst” when it comes carbon emissions.
The plan is a scaled-back version of a plan originally introduced by board member Victor Makras last spring that called on the pension system to divest of its $523 million in fossil fuel company stock and $36 million in fixed income securities in its portfolio within 180 days.
Nevertheless, board member Malia Cohen, who also serves on the San Francisco City Supervisors (the city’s governing body), called the vote, “historical.”
“We have taken another step forward to divesting of the riskiest and dirtiest fossil fuel companies,” she told CIO.
While the San Francisco system, and major pension plans like the California Public Employees’ Retirement System (CalPERS) and California State Teachers’ Retirement System (CalSTRS) have divested from some coal companies, no US public pension plan until Wednesday has approved a broader divestment that could include oil and gas companies.
New York City Mayor Bill de Blasio on January 9 said that New York City’s $189 billion pension system would divest of fossil fuel stocks, but any action would need to be approved by the boards of the five New York City pension system, who each would need to do their own fiduciary analysis.
The revised plan approved by the San Francisco system Wednesday was proposed by the system’s Chief Investment Officer William Coaker Jr. In a presentation, Coaker said “a responsible, phased approach” would be used to “analyze, engage, and divest from fossil fuel companies on a worst-of-the-worst case basis.”
Coaker argued against a large-scale divestment of all fossil fuel securities, saying the sector historically has been a hedge in inflationary periods.
But Coaker’s plan offered no timetable for possible divestment, and was amended by board members who required the CIO to develop metrics by April 30 as to how to classify the worst polluting fossil fuel companies.
Investment staff would then be required to develop a “watch list” of fossil fuel companies. Those companies could subsequently be removed from the portfolio. But even after the plan was approved Wednesday evening, board members and the CEO of the San Francisco pension system, Jay Huish, offered differing accounts as to when divestment could begin.
Markas said under the plan approved by the board, the watch list would need to be developed by investment staff by July 30. He said the board would start divesting of companies on the watch list at its August 8 meeting.
“We are on the way towards divesting San Francisco’s entire portfolio of fossil fuel securities,” he said.
Huish told CIO, however, that his understanding of the vote was that the system would have until the end of October to identify huge carbon emitters and divestment could occur after that.
Coaker had told the board that he needed the extra time past July 31 to identify the worst carbon emitters because existing investment staff was completing other projects.
The plan approved by the board also calls for the hiring of a director of socially responsible investing. Coaker said that will help identify companies with poor environmental records, but given city hiring regulations, it could take months to bring that person onto staff.
More than 100 environmental advocates jammed the meeting room. Many said they were disappointed by Wednesday’s vote.
Jed Holtzman, senior policy analyst with 350 Bay Area, said the resolution approved by the board was too vague and would not led to divestment.
“There is every reason to believe the staff is going to run out the clock on this,” he said.