San Francisco fund announces net-zero carbon ambition

The $27bn (€24.2bn) San Francisco Employees’ Retirement System (SFERS) has announced its “ambition” to achieve net-zero carbon emissions by 2050 after its board voted unanimously in favour of the proposal yesterday.

Though the fund notes in related documents that the move should not be viewed as a “goal or target”, as it is mindful “to not drive investment decision making that is otherwise inconsistent with achieving superior risk-adjusted returns”.

“Staff expects that implementing this [net zero] plan will involve ensuring investments are viable and not at risk in the transition to a low carbon economy”, it adds. “If this is done appropriately, it should be consistent with net zero by 2050 (assuming that countries, states, local municipalities, businesses and consumers across the economy do their part to similarly decarbonize)”.

"SFERS’ Climate Action Plan to become net-zero by 2050 aligns with the long-term probability and severity of risk caused by carbon emissions"

The new ambition will build on the Climate Action Plan it adopted in 2018, the same year SFERS’ board voted against wholesale divestment of fossil fuels.

That plan includes being an “active” member of ClimateAction 100+, the multi-trillion-dollar engagement initiative, divestment of thermal coal and developing a risk framework for oil and gas other utilities. 

SFERS also introduced a “Three Pillar ESG Platform” that “incorporates proxy voting, shareholder engagement and policy advocacy efforts alongside investment related actions”. 

A report on the progress of SFERS’ climate plan is due in October.

In the press release on its new ambition, the fund stated that identifying, assessing and addressing the investment risks and opportunities associated with climate change is a “key provision to sustain the long-term health of the SFERS trust and the payment of those benefits”.

SFERS’ public equity portfolio has 22.4% less carbon emissions that its benchmark, the MSCI All Country World Index Investable Market Index [MSCI ACWI IMI].

“SFERS manages its portfolio in recognition of scientific probabilities and severity and their impact on risk and return,” said Chief Investment Officer William Coaker.