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With lives, livelihoods on the line, SF clings to coal, oil investments

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The Chevron refinery fire, as seen from the Albany Bulb on Aug. 6, 2012. (Courtesy Michael Moore/via Flickr)
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Five years ago, on a clear August evening in Richmond, Calif., Isabella Zizi was outside with her family. Her older sister had finished riding their neighbor’s horse when the animal started acting strange. Then, Zizi remembers the sunlight disappeared. A fire had erupted at the Chevron refinery blocks from their home, and toxic smoke was darkening the sky.

“It really affected me,” Zizi, now 23, told me. “Every day, it makes me question whether my life is going to be OK.”

The anniversary of the horrific Chevron fire is a reminder that fossil fuels don’t just hurt weather patterns and ice caps; they hurt Bay Area residents. Now, San Francisco employees must also question whether fossil fuels will hurt their livelihood.

The San Francisco Employee Retirement System has kept its holdings in coal and oil companies — including $39 million in Chevron — despite hopes it would divest this summer. The City’s pension’s managers don’t want investment restrictions, and Retirement Board staff seem to be catering to their demands. Last week, a staff report recommended against divestment without fully disclosing the risks fossil fuels pose to the portfolio.

For some reason, San Francisco’s leaders are letting this all happen without publicly getting involved. City employees should be outraged.

Documents the San Francisco Examiner received after compelling staff to comply with public information laws reveal a glimpse into coal and oil holdings’ performance. From March 31 to June 30, the total market value of the pension’s fossil fuel equities fell from $442 million to $322 million. Of course, good stocks can have short-term periods of decline, and sales can bring down the overall value. But the dramatic $120 million drop in three months raises an important question: Are these investments helping the pension?

Staff didn’t provide an answer or even disclose The City’s fossil fuel holdings, performance and projected returns in their report. They did admit, however, that “energy has dramatically underperformed the S&P 500 for the past 3.5 years.”

Unfortunately for city employees, this underperformance may extend decades. According to Mercer, a leading investment consultant hired by the New York City pension, climate change will have a potentially significant impact on fossil fuel returns over the next 35 years. Coal’s average annual returns could drop by 74 percent. Oil could fall by 63 percent.

“The economic data I’ve seen indicates that the oil industry will soon follow the coal industry into steady decline and a wave of bankruptcies within the next decade,” Ian Monroe, co-founder of Etho Capital and a finance teacher at Stanford University, told me.

Increased government regulation and emerging technologies are helping this decline. France, the United Kingdom, India and Norway have announced plans to ban gas and diesel car sales. Oil-rich Texas has installed more wind power than Canada and Australia combined. States and cities are passing 100 percent renewable targets. Better and cheaper storage and clean energy technologies are emerging on the market.
Simply put, fossil fuels have become risky long-term investments.

“Even the UAE and Saudi Arabia are now trying to extract their futures from fossil fuels by investing heavily in renewables and selling off their state-owned fossil assets,” Monroe told me.

Staff glossed over these realities in their report and focused on painting divestment as a misguided response to climate change. They misled commissioners and city employees into thinking the purpose of cutting ties with fossil fuel companies is to lower carbon emissions. Unfortunately, some city employees fell into their trap.

“Divesting fossil fuels is purely a political position here in San Francisco,” San Francisco Police Officers Association President Martin Halloran wrote in a letter to the Retirement Board. “There is no room for politics when it comes to investing the pension dollars of hard working City employees, who depend on that monthly check in retirement.”

To be clear, divesting is not a political position. It’s a strategy to avoid risky investments like fossil fuels, which are underperforming now and expected to decline in the future. But Halloran isn’t entirely wrong: The folks entrusted with keeping hardworking city employees’ money safe must not play with their future.

San Franciscans who place their trust in the Retirement Board should be outraged by their negligent and deceitful games. Mayor Ed Lee should be publicly involved. City Attorney Dennis Herrera should require staff to comply with their fiduciary duty. Public pressure should be overwhelming as the Board prepares to vote on divestment in the coming months.

Of course, divesting from fossil fuels won’t stabilize weather patterns or stop ice caps from melting. But breaking up San Francisco’s toxic relationship with oil and coal companies could keep people’s lives and wallets safe.

Robyn Purchia is an environmental attorney, environmental blogger and environmental activist who hikes, gardens and tree hugs in her spare time. Check her out at robynpurchia.com.

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