San Francisco City & County Employees' Retirement System is adopting a six-point plan to reduce its exposure to fossil-fuel holdings, confirmed Norm Nickens, board secretary.
The $24 billion pension fund's board unanimously approved the plan recommended by the staff rather than immediately divest from fossil-fuel holdings in Carbon Underground 200 index companies such as Exxon Mobil, Royal Dutch Shell and Chevron in a special meeting Wednesday. As of Sept. 30, the pension fund held $523 million in equities and $36 million in fixed-income securities in CU200 companies.
The plan, according to a staff memo, consists of:
- creating a $1 billion passive large-cap carbon-constrained strategy in the pension fund's passive public markets portfolio, reducing carbon-emission exposure by 50% vs. the Russell 1000 index;
- hiring of a director of socially responsible investing;
- partnering with other large asset owners and institutional investors to share "tools and resources and to develop and support collaborative initiatives to reduce the risks associated with owning fossil-fuel securities";
- enhancing the pension fund's shareholder engagement activities consistent with the Principles for Responsible Investment;
- pursuing more carbon-constrained and renewable energy investments; and
- analyzing, engaging and divesting from the "worst of the worst" fossil-fuel companies.
The retirement system's staff, along with general investment consultant NEPC, had recommended against total divestment from fossil-fuel holdings because doing so would have materially reduced "the potential risk-adjusted return from the SFERS public markets portfolio," the staff memo said.
Brian Stansbury, president of the board and elected member, said in a news release that "while the board is committed to socially responsible investing, we must ensure that all investment decisions meet our fiduciary duties and do not negatively affect our investment returns."
In December 2015, SFERS' board had voted to divest from all of its coal stocks and reinvest the $21 million in renewable energy assets. Fossil-fuel stocks make up 4% of the pension fund's equity portfolio.