San Francisco City & County Employees' Retirement System approved changes to its environmental, social and governance policies, including the removal from its restricted list of two-thirds of the oil and gas companies that had been on the list.
The $34.1 billion pension fund's board also approved adding to its restricted list more companies that derive significant revenue from thermal coal mining, as well as one company that is involved in Sudan.
The board approved the recommendations by Andrew Collins, director of ESG investing, and Blake Broadnax, investment officer, ESG investing, at its Dec. 13 meeting as a result of their annual ESG review, recently released meeting minutes showed.
Among oil and gas companies, the staff and MSCI ESG Research recommended the removal of six of the current nine companies from its restricted list. Those are APA Corp., Continental Resources, Diamondback Energy, Hess Corp., Matador Resources and PDC Energy. Collin and Broadnax said in a memo to the board included with meeting materials that they recommended the removal of the six companies because one was taken private, two were acquired and three showed "improved performance on the metrics used by the framework to determine investment restriction." The memo did not identify which companies fell into those categories, but Continental Resources was recently taken private, and Chevron Corp. announced agreements to acquire PDC Energy and Hess Corp. in May and October, respectively.
The three remaining oil and gas companies on the restricted list are Baytex Energy, Chesapeake Energy and Crescent Point Energy.
Among thermal coal companies, the staff and MSCI ESG Research identified Golden Energy and Resources, PT Petrindo Jaya Kreasi, Terracom and Yancoal Australia as four new companies that derive more than 50% of their revenues from thermal coal mining and have no plans to exit thermal coal. They also identified Allete Inc., CHN Energy Investment Group Co., Jardine Cycle & Carriage, Tata Power Co., PT Astrindo Nusantara Infrastruktur and NLC India as four new companies that derive between 10% and 50% of their revenues from thermal coal mining and also have no plans to exit thermal coal. The board approved the addition of the eight companies to the pension fund's restricted list. SFERS is not directly invested in any of the companies.
The board also approved the removal of Huadian Power International Corp. from its list of restricted thermal coal companies because thermal coal now represents less than 10% of the company's revenues, Collins and Broadnax said in a memo to the board included with meeting materials.
SFERS has a list of 53 companies restricted because of their thermal coal involvement.
Also, the board approved the addition China Petroleum & Chemical Corp. and its subsidiaries to the list of restricted companies with business involvement in Sudan because the staff and MSCI ESG Research determined the company as of March 2023 held a 6% stake in Dar Petroleum Operating Co., a South Sudan company that "directly financed militias accused of committing atrocities in the country's civil war," Collins and Broadnax said in their memo.
The two recommended the addition of the company due to its holding in Dar Petroleum, "which indicates that it does not have effective governance structures in place to manage risk associated with its business activities."
The Sudan-related restricted list currently has a total of eight companies.
Collins and Broadnax recommended no changes to the lists of restricted tobacco companies and restricted firearms companies.
