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Fossil fuels are toxic assets

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As California moves toward 100 percent renewable energy production, reserves of fossil fuels are likely to become useless “stranded assets.” (Courtesy photo)

Four recent announcements have fueled the urgency for the San Francisco Retirement Board to divest from fossil fuels in a vote pending tomorrow.

On Jan. 9, the City of New York formally announced its $191 billion pension fund would divest from fossil fuel interests, joining the State of New York’s announcement just weeks earlier. These announcements followed one of San Francisco Mayor Ed Lee’s final acts as mayor in December 2017: a strong public statement urging San Francisco’s Retirement Board to fully divest from fossil fuel holdings in response to the Trump administration’s attacks on the environment and basic human values. Meanwhile, NASA announced last week that 16 of the last 17 years have been the hottest years in recorded history, underscoring the fact that human activity is contributing to global climate disruption.

SEE RELATED: Time for San Francisco to divest from fossil fuels

Yet, San Francisco’s Retirement Board has repeatedly delayed on a vote to completely divest. This delay is counter to increasing evidence that fossil fuels are not sound long-term financial investments and puts the board’s fiduciary duty at risk. Here’s why:

As local communities are harmed and even displaced by climate impacts like rising sea levels, California, as well as many other state and local governments, has responded by enacting more protections against climate change and is moving toward solutions like 100 percent renewable energy. This means, in the next two decades, California — the world’s sixth largest economy — may shift completely away from relying on any oil dredging or coal burning for its energy production. Consequently, reserves of fossil fuels are likely to become “stranded assets” that are useless, which, in turn, slashes the value of retiree benefits mired in fossil fuels.

The recent events in New York further upend the market and unequivocally signal that fossil fuels are toxic assets. The retirement funds of New York City and New York state are collectively worth $391 billion, and hundreds of additional institutional investors managing assets of more than $5.5 trillion have taken their money out of fossil fuel investments. This view has also been affirmed by a number of financial experts, including former Securities and Exchange Commissioner Bevis Longstreth, Tom Steyer, Trillium Asset Management, Mercer, Edward Jones Investments and staff from Bloomberg and MSCI (Modern Index Strategy), among many others.

Many of us in San Francisco are seeing the writing on the wall and are troubled by the Retirement Board’s repeated inaction. The San Francisco Board of Supervisors unanimously passed a resolution urging divestment not once, but twice — thanks to the combined leadership of current supervisors Aaron Peskin and Malia Cohen and former Supervisor John Avalos. Tonight, San Francisco’s Commission on the Environment will vote on a resolution calling for “full and expeditious divestment” of all fossil fuel holdings.

Managing our public employee dollars well means realizing the strategic importance of divesting from fossil fuels. The San Francisco Retirement Board has a clear alternative: Invest in superior, clean energy technology instead. In fact, a new investment strategy could model the divest-invest strategies of the Rockefeller Brothers Fund, whose wealth originates from Standard Oil. In the words of the fund’s president Stephen Heintz, “John D. Rockefeller, the founder of Standard Oil, moved America out of whale oil and into petroleum. We are quite convinced that if he were alive today, as an astute businessman looking out to the future, he would be moving out of fossil fuels and investing in clean, renewable energy.”

Indeed, we should follow suit and recognize that the global transformation to a clean economy will soon replace fossil fuels with wind and solar.

When San Francisco hosts the Global Climate Action Summit alongside Gov. Jerry Brown, Michael Bloomberg and the United Nations in September 2018, we will have a unique opportunity to showcase our city’s considerable environmental achievements. We must heed Mayor Lee’s call to cut ties with losing fossil fuel investments that devastate our environment. Let’s take our money out of dirty energy and put it into clean energy for a better, healthier world.

Eddie Ahn is a member of the San Francisco Commission on the Environment and executive director of Brightline Defense, an environmental justice nonprofit that works to empower communities and create sustainable environments. Lisa Hoyos is a member of the San Francisco Commission on the Environment and the director and co-founder of Climate Parents, a program of the Sierra Club that mobilizes diverse parents and families for clean energy solutions.

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