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Retirement Board bets employees’ future on dirty, dying coal industry

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Despite being directed to sell, the San Francisco Employees’ Retirement System has clung to its coal investments. (Courtesy SFERS)
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The City’s pension fund managers and President Donald Trump have something in common: a hope for coal’s resurgence. Although demand for the climate change-causing fossil fuel has thankfully dropped, Trump promises to revive the industry. Similarly, the San Francisco Employees’ Retirement System has clung to its coal investments despite being directed to sell and losing money. This stubborn faith isn’t only impractical, it’s destructive to the planet and retirees’ wallets.

“What good is my pension check if my children, my grandchildren and I have no future,” Martha Hawthorne, a retired City employee, asked the Retirement Board last month. “Why do you ignore the Board of Supervisors and members who are depending on you to do the right thing?”

Hawthorne’s confusion is justified. Four years ago, the Board of Supervisors urged the Retirement Board to divest from fossil fuels. In December 2015, the Retirement Board voted to restrict its coal holdings and asked staff to create a plan to do it. Next Wednesday, staff will present its strategy. But after all this time, they’ve only proposed divesting from one previously bankrupt company — a mere $67,594 out of the $47.8 million the pension invests in the dying industry as of April. Why aren’t they doing more?

It’s not because coal is a strong investment. SFERS staff has admitted “the economics for thermal coal are not favorable.” The numbers support the statement. From March to April, the value of the pension’s shares in mining company Glencore dropped from $8.4 million to $7.4 million. Almost all the other coal holdings suffered losses, too. Betting on the industry’s comeback seems like betting on a horse and buggy boom.

“More than 90 percent of coal investments were losers in 2015,” Retirement Board Commissioner Victor Makras, who voted to divest from coal that year, told me. “I believe staff’s decision not to sell is more self-driven than prudently driven. They don’t want to book a loser.”

If this is true, Executive Director Jay Huish and his staff aren’t selling the majority of the pension’s coal holdings because they fear admitting losses. They may be more concerned with their reputations than retirees’ money.

Huish has pointed to the power of shareholder engagement as a reason for not selling, though. Shares give investors a voice to change company behavior. Huish implied shareholders influenced mining giant Rio Tinto to sell a coal mine for $1. He didn’t note the company was accused of selling to avoid environmental cleanup costs. He also didn’t describe the specific ways SFERS regularly uses its shares to influence Rio Tinto or any fossil fuel companies. His faulty claims of shareholder engagement simply can’t justify putting retirees’ money at risk.

But staff isn’t solely to blame. Some commissioners, resistant to divestment, piddle away meetings rehashing decisions, speculating about ways to address climate change and putting up procedural roadblocks. When staff first recommended divesting from the bankrupt coal company last July, the board passed the ball to its Environmental, Social and Governance Committee, which rarely meets. This move delayed any action by 10 months.

“I don’t believe the ESG Committee should exist,” new commissioner Al Casciato told me. “The board leadership is responsible for committee creation and performance, otherwise why have them?”

Maybe SFERS Board President Malia Cohen can get staff and commissioners in line. As a member of the Board of Supervisors, Cohen urged the Retirement Board to cut ties with fossil fuels. As a candidate for the state Board of Equalization, she’s highlighted her efforts to divest from fossil fuels and coal. While these efforts are hardly worth mentioning now, they could be as soon as next week.

“I am personally committed to continuing to push the board to lead on this issue,” she told me.

It’s good to hear, but actions speak louder than statements. At the next board meeting on May 17, urge Cohen and all commissioners to show retirees they care more about their future than fossil fuels.

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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