San Francisco fund opts for $1bn low-carbon move over full fossil fuel divestment

The UK’s Merseyside also takes low-carbon route

After a five-year long battle on the issue, the San Francisco Employees’ Retirement System (SFERS) board yesterday voted not to divest the $20bn defined benefit fund from fossil fuels.
The SFERS board instead adopted a number of recommendations including the creation of a new position for Director of Socially Responsible Investing and the establishment of a $1bn fund for a new “carbon-restrained” investment strategy.
SFERS was first prompted to divest from fossil fuels in 2013 by John Avalos, a member of the Board of Supervisors – the legislative body of the City and County of San Francisco.
Supervisor Aaron Peskin reiterated the call last year, following years of minimal progress. Board of Supervisors President London Breed reportedly told the SFERS board before the vote: “We have a seawall that needs to be armoured because of sea level rise. We all cannot afford to wait around for reports and more strategies.”
In the event, the SFERS board voted for a $1bn low-carbon strategy, a phased approach to divesting of the “riskiest and dirtiest” stocks, and the hiring of an SRI director, among other things. The moves were supported by SFERS staff.
Supervisor Malia Cohen, who favours divestment, introduced further successful motions during the meeting, calling on staff to identify a “concrete” definition of the “riskiest and dirtiest” fossil fuel assets, according to the San Francisco Examiner. She also called for the development of an engagement plan containing a clear timeline for divesting holdings that didn’t comply with the board’s requirements.
It is expected that SFERS staff report back on the fund’s fossil fuel assets – around $559m – by July 31.The fund had appeared close to a full divestment (as discussed in this contributed article) and yesterday’s decision was met with disappointment from campaigners. Executive Director May Boeve said: “Doubt and delay is Big Oil’s strategy — it shouldn’t be replicated by those meant to represent us. Climate change will not pause so San Francisco’s public officials can take another year or two to gather up their nerve.”
The decision comes on the heels of New York City’s five public pension funds, running assets of $189bn, making the momentous decision this month to divest their entire $5bn holding in 190 fossil fuel companies within five years.
Meanwhile in the UK, the Merseyside Pension Fund Committee has agreed that it will move one-third of its £1.1bn passive investment portfolio into low-carbon index trackers over the next five months. It is expected that the move will reduce the carbon intensity of the portfolio by 50-70%.
It follows a three-year campaign by local Green Party councillor Pat Cleary, who sits on the fund’s pensions committee.
Speaking to RI, Councillor Cleary said that the Merseyside Pension Fund’s active portfolio did contain fossil fuel investments, and he was pushing for change on this too.
Merseyside Pension Fund is set to pool its assets with the Greater Manchester and West Yorkshire pension funds this year to create the £35bn Northern Pool.
Cleary said the creation of the Northern Pool was still in process but he hoped Merseyside’s decision would encourage the Greater Manchester and West Yorkshire funds to adopt similar measures.
“There is a clear risk of stranded assets and there is an obligation on fund managers to take this seriously. It sends an important signal,” he said.