By Carlos Solorzano, Chief Executive Officer of the Hispanic Chambers of Commerce of San Francisco.
If Californian billionaire Tom Steyer has his way, the San Francisco Employee Retirement System will soon dump its fossil fuel investments – $470 million in total – in a move known as divestment. Such a move would make the SFERS the first major pension fund in the nation to take this drastic action. Steyer pleaded his case for just that in an August 8th piece in the San Francisco Chronicle.
Unfortunately for working people in the state, divestment holds zero promise for attacking the issues that most Californians care about: making a liveable wage, obtaining quality healthcare, and saving for retirement. Neither does divestment do any good for the environment. The reality is that divestment by the SFERS won’t do anything to reduce the use of fossil fuels. As the late Joseph Dear, CalPERS’ former chief investment officer, once said, divestment is simply “a noble way to lose money.”
In other words, divestment is a distraction from the real problems Californians face, won’t improve the environment, and will likely cost people some of their retirement savings. Keep in mind that the city’s net pension liability already sitsat $5.5 billion, with the city’s pension needs expected to increase by 36%, or three times the growth rate of revenue. Now is not the time to endanger the SFERS nest egg, which serves 68,000 people in the City and County of San Francisco.
So what is the pressure for divestment in San Francisco really about? The truth is that Steyer’s divestment crusade is just the latest in a series of attempts to force his obsession with climate change into the daily lives of Californians. For years, Steyer has used his billions railing against oil and gas companies, joining a small, but vocal, group of environmental activists who insist that divestment is somehow part of a moral obligation to the planet. (Ironically, Steyer obtained much of his wealth by investing in fossil fuels.)
Steyer’s hypocrisy on fossil fuel investments notwithstanding, his view is woefully out of balance with California’s realities. A complete rejection of fossil fuels might make for good soundbites for some politicians, but California’s economy still depends heavily on energy to make daily life possible and to create jobs for thousands of families. Put simply, the divestment campaign not only lacks balance, but it runs counter to common sense and good stewardship of pension dollars. It might make Tom Steyer sleep better at night, but it does nothing for most Californians.
In fact, the potential losses for the SFERS could be significant. A study from Compass Lexecon found that divestment would cost the fund $11.5 million annually, or nearly $150 billion over fifty years. If that divestment includes utilities, the losses would swell to a staggering $201 billion over fifty years.
Despite compelling arguments against divestment, Steyer’s crusade has gathered support in some quarters. The San Francisco Board of Supervisors recently passed a resolution urging SFERS to divest from fossil fuels. Supervisor Aaron Peskin, even threatened to introduce a 2018 ballot measureto allow San Francisco residents to force divestment by the SFERS.
Others, including SFERS Executive Director Jay Huish, SFERS Chief Investment Officer William Coaker Jr., and the System’s staff are opposed to divestment.
“This is a very difficult legal question and discussion that every fiduciary on every public pension plan across the United States is dealing with today,” explained Huish to the supervisors’ Government Audit and Oversight Committee during divestment discussions. “None of them have been able to come forward and do a complete ban.”
“We recognized that SFERS divestments from fossil-fuel holdings will not reduce carbon emissions — it simply changes ownership of these securities,” adds Coaker. “With divestment, SFERS will forfeit its standing as a shareholder to engage these fossil-fuel companies to transition their business plans to a low-carbon economy in line with the Paris agreement.”
At the moment, SFERS board members remain divided on divestment, with one board member undecided. They soon will have a critical call to make: join Tom Steyer in his climate change obsession or do what is best for the fund they have a responsibility to oversee. As that decision looms, many are depending on the SFERS to choose wisely. Not only the public safety officers and civil servants who have paid into the SFERS their entire careers, but city taxpayers, including many minority-owned local businesses, who expect the SFERS to go about the business of making money, not costly political statements.
The choice seems clear. The SFERS Board, the SF Board of Supervisors, and other California officials across the state should reject Steyer’s out of touch ideological agenda. They should focus their energy instead on growing our economy, reducing the city and state’s carbon footprint in practical ways, and standing up to the Trump administration on immigration, the border wall, and civil liberties. A politicized divestment agenda simply isn’t a solution.