Brick walls typically don’t respond to pressure. Like the people in charge of the San Francisco Employees’ Retirement System, they are known for staying stubbornly fixed despite requests from city leaders, including the late Mayor Ed Lee, they move.
But even the most unyielding brick wall is no match for San Francisco. Our city is known for powerful movements that shake bricks free and send them crashing to the floor. Here, you either bend or break.
Maybe Retirement Board commissioners felt the ground trembling last week when they directed staff to create a plan for targeted fossil fuel divestment. The vote seemed like an attempt to appease the groundswell of retirees, city employees, labor representatives and residents who repeatedly ask the board to divest from risky coal and oil companies. Perhaps, commissioners thought words could slow the movement.
If so, they thought wrong. The board’s recalcitrant staff has fought divestment for years. When commissioners voted to restrict thermal coal holdings in 2015, it took staff until 2017 to present a pitiful strategy that continues to leave the pension exposed to the dying coal industry. Commissioners can’t ask for another plan and expect celebration.
If San Francisco doesn’t see real action soon, the Retirement Board could break. Supervisor Aaron Peskin presented a proposal that would allow San Francisco voters to remake the board. The legal community is also watching. While staff could give the board the support it needs to survive, it seems unwilling to bend.
“Staff is being defiant,” Retirement Board Commissioner Victor Makras, who introduced a fossil fuel divestment motion last May, told me. “They’re foregoing their duty to inform the board, themselves and the public.”
Staff’s discussion of fossil fuels’ performance is one example. Last week, Chief Investment Officer William Coaker highlighted that the dirtiest oil and coal companies, like Exxon and Chevron, earned the pension an estimated $80 million profit over three months. Only in response to commissioners’ questions did he admit that, overall, the energy index has had a “bloody, horrible” last 10 years.
Buried as Attachment C to Attachment E of a 374-page staff report is a list of underperforming, fossil fuel holdings. Devon Energy, an oil and gas conglomerate held by the pension, is one of the pension’s predictable losers. In September 2017, it lost the pension more than $1 million. According to reports, the company is also known for working with Environmental Protection Agency Administrator Scott Pruitt to undercut environmental protections.
Coaker should have highlighted Devon Energy and other losing investments. But staff let relevant information remain buried.
“Staff’s report indicates fossil fuel stocks hurt performance significantly over the last five and 10 years, and didn’t move the needle on 20- or 40-year performance,” Will Lana, an investment manager at Trillium Asset Management, told me. “That information is much more relevant to highlight even though it’s favorable to divestment.”
Staff’s failure to recommend divesting from Devon Energy and similar underperforming fossil fuel holdings doesn’t only threaten retirees’ and city employees’ future; it also puts commissioners in a precarious position.
This week, Peskin, a divestment advocate, moved forward with his proposal to remake the Retirement Board. If the supervisors approve his proposal, San Francisco voters may see it on the November ballot. In 2013 and 2017, the supervisors unanimously urged the board to divest from fossil fuels.
The legal community is also watching. A coalition of attorneys spanning multiple Bay Area law schools submitted a memo to the Commission on the Environment and Retirement Board last week. According to the memo, divesting fulfills the board’s duty to retirees and current employees. Failing to divest may breach that duty.
“An argument can be made that the Retirement Board may potentially violate the duty of prudence and breach the fiduciary responsibility to trustees if it fails to diversify a portion of shares among better-performing clean stocks as fossil fuel-based stocks are expected to become ‘stranded’ and gradually lose value over the next 20 years,” Dale Radford of the UC Hastings Environmental Law Association told me.
The day before he died, Mayor Lee called on the Retirement Board to divest from the riskiest and dirtiest fossil fuel assets. His message and legacy should have jolted them into action. But all San Francisco got was more words. Let’s show them how strong The City can be.
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.
GREEN SPACE Q&A
In response to my article, “San Francisco must toss its throw-away culture,” I received many emails from San Franciscans confused about The City’s recycling and composting program. I’ll try to answer all of your questions in the coming weeks:
“I’ve never figured out how one can collapse juice and soup boxes — which can now be recycled — and still make sure they’re DRY for recycling. Any thoughts? — Diana Scott
Good news: San Franciscans don’t need to collapse their juice and soup boxes before putting them in the blue bin. Recology, The City’s trash provider, only asks that they’re empty. The company suggests turning the box upside down to drain remaining liquid into a bowl and pouring the bowl in your garden, if you have one.
Sorting is confusing. San Francisco, please help me and your neighbors out by emailing more inquiries to firstname.lastname@example.org. I’ll try to answer as many as I can.