significantly reducing our emissions and close to launching the clean power. california is moving for ward with the implementation with ab 32, environmentalists are finding to stop the keystone pipeline and there are hundreds and thousands of people to protest the pipeline when president obama came to san francisco. but government action is not enough. the fossil fuel companies are the root of our climate problems, in fact the companies have tried very, very hard to make sure that the debate and discourse about the climate action is something that is not scientific at all and it is based on things that do not exist or are not measurable by science. we can exercise the power of our pocket books by divesting our retirement fund from the fossil fuel companies. the retirement board can divest without effecting the fund security or yield. the staff of the retirement board estimates that out of the

15.6 billion only one billion is invested in securities, either incorrect or correct investments such as mutual funds. we are not calling for immediate divestment, the resolution calls for seizing new fossil fuels and divesting within five years, this gives the retirement board to divest in a responsible way, as mentioned above, the hsbc bank, argues that the stocks will become increasingly risky as the climate change excel rates. they are studying how can be done without increasing risk, the apario group, calculated that divesting from fossil fuels will increase the portfolio risk by 0.01 percent such as the fund, the russell 3000 fund and they will respond that. >> they will expand on this at public comment. >> this is now on the investment policy, the san francisco retirement board has

a policy that can serve as a model for other pension funds, in fact the seattle mayor's office asked us for a copy as they work on it for the fossil fuel companies. it has been applied to south africa and tobacco, three levels of eninvolvement. level one calls for citizenship for securities owned by the retirement fund and level two calls for the fund to use the shareholder influence to promote social rights and interests and level three calls for full divestment. models on the policies leveled two engagement our resolution urges the retirement board to contact the fund managers for funds that include the fossil fuel companies to request that they be excluded from the fund, a similar process was followed during the tobacco divestment campaign in the 90s this led to

the common practice of investment firms creating tobacco fund funds, imagine that fossil free, it is our goal that the building pressure of the global campaign to divest, will lead to fossil fuel free funds. and it gives the retirement board to reenvest in clean energy and jobs. and consider the options for reinvesting the funds for securities that will promote renewable energy and local jobs and things that our city desperately needs. so i have a number of speakers i would like to call up. we have director jay huish from the retirement board we would like to call up first, mr. huish. i do not see him coming up. he was going to talk about the retirement board, social responsible policies and about

the portfolio that we have in investment in the fossil fuel companies and i do not see him here and he is not coming up so we will go to the next speaker, i have a number of cards that i will call as well. i would like to call up jamie hen followed by antonio gehas. >> well, good morning, and thank you very much for hosting this hearing on fossil fuel investment and special thanks for supervisor avalos and his staff for crafting the resolution. i am the co-founder for 350.organize an international climate campaign that is helping to lead this movement. we launched this last fall and already students at over 300 colleges and universities have taken up the effort and now it is spreading to cities and states as well. already more than 100 communities have started to push for divestment and as supervisor avalos mentioned

this fall the mayor of seattle issued a declaration to pursue this goal. if i could have the folks to stand up who are here to support the resolution, you can do a good job. >> and you will see a lot of people are wearing these orange squares that emerged as a symbol for the student movement around the country. all of us here hope that san francisco will be the next city to pursue the fossil fuel divestment. just last week, 561 local residents have signed on to a petition supporting the call and hopefully there will be many more. since i know that the board of supervisors has supported a number of initiatives i will not dwell on the risks that it poses to the community and the bay at large, but in the last year we, have already seen the early impacts of this crisis first hand from the historic wildfires from colorado to super storm sandy to effects

right here in california. the divestment is a moral necessity, if it is wrong to wreck the planet it is wrong to profit from that wreckage, it is also a effective political tool, it shows the industry that is unable to continue with business as usual and speakers will highlight that it is economically feasible approach, as we look at the long term risks associated with the investments in coal, oil and gas and the benefits of investing in the more sustainable alternatives it is clear that it is a wise action. >> as tutu won a nobel prize, the divestment provement played a key role in helping to liberate south africa and they understand the money even when they were not swayed by the dictates of mortality. we can join together as a world and put the pressure where it

counts. we hope that san francisco will join this effort and that the board of sburps will move this resolution forward thank you very much. [ applause ] >> thank you. >> thank you, our board rules do not allow clapping or applause from the audience, so that was a very spirited clap and applause, but we do allow people to express support that way. thank you. we appreciate your support on that. >> hi, thank you. >> thanks for holding this hearing, and my name is antonia uhas and i am a author and journalist and i have invested for the new york times and cnn and three books, including the tyranny of oil and black tide the impact of the gulf oil spill and also worked for two members of congress, i traveled from louisiana to afghanistan to richmond, back here. to uncover what it means to

live where the oil industry operates. i am here today, to urge you to divest from the fossil fuel industry. big oil is looking backward. divesting from clean energy and doubling down on dirty energy. investments in big oil, are an investment in increasingly dangerous past. san francisco should look forward to insure that the investments help to guarantee a clean future. last week, bp which famously dubbed itself beyond petroleum announced the sale of the $3 billion wind energy business, eliminating... (inaudible) to become a more focused oil and gas company. it is not alone, after reaching a high of no more than 4 percent of total capitol expenditures in 2006 and 2007 big oil as a whole began

rapidly divesting from alternative energy and most companies including our chevron from 0 to 2 percent range of total investments today. the reason, the policis that allowed the companies access to never before accessible or acceptable sources of oil. the industry able to inrage war, and the oil and gasoline prices sfai that way and more importantly that the benefits of these prices go directly into big oil's pocket. these have allowed it to keep its back firmly pressed against the future. chevron became the world's second high ranked company in terms of valuation, the climb is attributed to just one thing, betting on oil, not on natural gas or energy, to carry it into the future, the oil resource base helped to beat in

earnings per oil. >> not all oil is equal. betting on it today means increasingly deadly and dirty oil, oil to fight the wars and the disaster of the tar sands across north america into under regulated pipelines and trains that rupture on route to the golf coast to be shipped into other markets to feed other markets oil from below the surface using technology which fails and causes the worst disasters in history, meanwhile big oil uses the profit to buy off the public process, to make... >> i have to stop you and i would like you to finish your comments. >> okay. >> thank you. >> big oil is turning backwards, and dark path and san francisco must divest if we want a future at all. >> thank you. >> before we go on to other members of the public to comment, we do have director from the retirement board here.

mr. jay huish. thank you for coming. >> i apologize for being late and i was watching the hearing and i had no idea that the first three items would move that quickly. from the retirement system and i am the director and i would be happy to answer any questions that the committee might have. >> thank you for being here. i asked you to come to be ready to present on and discuss what the investment portfolio is for fossil fuel for the retirement fund and also to talk about the social responsible policies for the retirement fund, are you preprayed for that? >> i am. >> the retirement policy deals with the public holding of the trusts and the ownership of the 200 companies that was a list provided by your staff and indicates that as of today, in our stock portfolio, we hold 81 companies out of the 200 stock

and the market value of those is $469 million. on the fixed income side, the debt side, we have 41 positions and those positions might not reflect 41 companies but we have 41 debt positions for a market value of $55.8 million. so, the total public holdings are roughly, $528 million. as i indicated, the retirement board has a long standing policy, a social investment policy and i will be happy to walk the committee through the policy, it was adopted in 1988. and it basically states that it is to provide the retirement board as fiduciaries to the beneficiaries of the trust, and they should give adequate recognition to the social

consequences of corporate actions and investment decision to achieve maximum, long term investment from trust assets and why insuring, and the tenants of the policy take precedent over the fiduciary responsibilities of producing investment returns for the exclusive benefit of the members and beneficiaries. social concerns are addressed through the policy will follow an order of action outlined by the policy, except where the retirement board determines that the action contemplated in an earlier step has been initiated prior to the consideration of the action and found to be ineffective. the three levels of action is first level we call it level one and it is share how holder voting and we will vote our shares in accordance with the direction of the board of the social issues that they would direct the staff to monitor, that would include us reporting back to the retirement board and the out comes of those

votes, how we voted and what the eventual out come would be on any kind of shareholder proposals that were presented in this case if it were the 200 companies we would be hon toring the shareholder meetings of all 200 companies. level two, is engagement and that would be. the retirement ward would ask the staff to proactively pursue change in behavior and that will be letter writing and we will write the letters to the board or the presidents of the company, urging them to change the policies to conform to the social direction that the board has chosen, we could introduce our own shareholder proposals at annual meeting and also to promote a change in behavior as directed by the retirement board and also out reach to other similar interest groups and plans to join us in those efforts that is level two, it is called engagement. >> level three, if level one and two actions are not

successful in changing the behavior, there are restrictions at level three. the restrictions could include, prohibting our investment managers from investing or purchasing any additional holdings in those companies as well as ininstructing the investment managers to use their best effort to try and replace, the existing holdings with investment that would have a like return and a like risk. and so, that basically is the policy does require as a mentioned that you go through each level, and go back to the board to report the results of each level's activity, the board could consider going to a higher level. >> thank you, so in the presentation, you mentioned we could finish in sentence and says that the tenants of the policy should take residence over the investments could you go forward? >> it tenants in fiduciary, and

no event would it exceed the state constitution and the charter requirements that they act as fiduciaries to all of the beneficiaries and members of the system and that this system cannot supercede that, however, it does allow them to express social concerns that they want to either engage at any of these levels all the way through, restricting and in the past, the types of things that the board has used this policy on are tobacco, sudan the most recently, we did south africa, but those restrictions that policy is now gone. >> why do you think that the city decide that the retirement board decided to take onto and sudan and formally apartide. >> i was here with sudan and it was a group of folks that approached the board members and they requested that it be calendared and directed the staff to do the due diligence

to the companies that were identified in the portfolio and the board's responsibility and staff's responsibility is to give the board information as to how any of these actions, in particular, the third action, restricting investment in those companies would impact over all portfolio structure, diverse amation and return, and i am the similar situation with tobacco. >> do you think that the fact that last year, was the hottest year in recorded history that the fact that the past three months was the driest month that we have ever had in the bay area. the fact that we have the worst oil spill in the gulf of mexico because the oil companies are drilling deeper and deep tore get at harder to find oil. we are looking at tar sands oil

which is dirty because that is what we had left. the fact that we had a dramatic hurricane that affected new york that many people believe was the tipping point for the presidential election and that all of these things could be considered as real evidence that investments in fossil fuel companies is a dangerous thing? and that we should be looking at other ways of investing our dollars would that be important to the members and i know that you can't always speak to them? >> as the policy states that is a discretionary of the board and the staff does not make a recommendation on that because it is within the board's policy that that is the authority of the board and the discretion of the board. >> we know that the board in the past has seen the real threats to human survival through tobacco and that the conditions in the sudan are important to work on. i think that when it comes to the real dramatic impact that

we will see in decades, ahead if not in the immediate future, the human habitat its will be something that could move the retirement board and i hope that is the case. >> i cannot issue an opinion on that. the board has engaged tobacco and the companies who are aiding and abetting the situation with the government of sudan in the past and so i think that they have a record of being, you know, willing to consider those issues. and again, i would have no way of knowing how or what the out come would be of the board. >> okay. >> and you don't think that the fossil fuel companies have a big deal of influence over the retirement board members either? >> i would have no knowledge of that. >> yeah. >> just a question, i had we originally got the rough estimates about what the over all funds for the retirement board were in fossil fuel companies and we got a number that was 1 billion dollars. and what you said here is much less than that. so if you were able to actually

go through and do some analysis and get some real numbers? >> the numbers that reported initially to the board when we first got the list was it was over a half a billion dollars, $500 million and we just completed the research and in fact, in our public holdings there could be other interest that we hold in the private asset side. but, again, the social investment policy only addresses the public side of the portfolio and that is the 500 and roughly $530 million. >> so is there any way that we could have any impact on applying social investment policies to the other part of the portfolio? >> no, we have legal restrictions and limited partner and we have fiduciary protection and we do not have an ability to influence the management decision whens we are a limited partner in a general partnership and so we have contractual obligations

and legal requirements that would prevent us under this policy to engage the private equity side or the private holding side of the portfolio. >> and you said under this policy? >> well, the policy recognizes that in fact we have legal obligations as to the contracts and the nature of our investments that would be under mind if in fact, we tried to influence management as a limited partner withholdings in the general partnership. and then, and in terms of what you have identified under the social responsibility investment policy and the investments in the fossil fuel companies here and how does that compare to the investments that we had previously under tobacco investments and with the sudanese investments. >> i don't have that information with me and i would be happy to provide that to the committee. >> could you estimate? >> no, i have not looked at that. >> that is something that we could follow up on.

>> i think that if it is comparable it seems like the decision has been made in the past to actually make the decisions around the divestment. and for a large amounts of money, if it is large amounts of money that was divested from in the industries in the past. just from the consider that and follow that up off line. thank you. >> thank you. >> mr. huish? >> sorry. >> no problem. >> thanks. you talked about $524 million in terms of, this direct equity in these two companies? >> right. >> so, the resolution and some of the other dialogue has been around coming the assets and the mutual funds and have you analyzed that you hold and parcel that out? >> we have not because the board's policy would not also, it would rule that out because of the nature of our holdings as a member of the commingle

fund would preclude us from engaging in the engagements of trying to influence the management of those funds. >> okay. >> you have identified what you have said in terms of 41 positions. those are direct holdings? >> those are public debt holdings. >> okay. >> and of the 81? >> those are public equity, actual ownership of stock. >> thank you. >> in the companies. >> great. >> so, okay, so this resolution, i'm reading from the words here, urges the retirement board to seize in the investments and the commingle. >> the board does not have a policy and there would be legal restrictions for us exercising it against our holdings and commingle funds. >> okay.

>> so, of the $524.8 million that you have identified in equity and debt, how does that compare against and we are not, so if we are going to compare apple to apples we are not talking about the commingle funds at all and what is that as a percentage and how much direct debt holdings do you have as an over all portfolio? >> $8.6 billion and these holdings represent 8.7 percent. >> the only comparison is that the index that we have to bench mark, the holdings of these two companies represents, let me get the number correctly. 13.2 of the index and so we are under weight in these companies verses the index and the bench mark index that we use to measure. >> what bench mark are you using? >> it is the msci, acwi.

>> so, not russell or anything? >> no. >> any other subtext? >> yeah. a custom index. >> right. >> okay. so 8.7 percent of holdings and let me take a step back to thank supervisor avalos for this hearing as well as to agree with all of the comments about the fossil fuel companies and i could not support those statements any more. my questions are more around the responsibility of whether the retirement board should be doing this and the impacts on what this might be for the retirement board members. and so 8.7 percent of your holdings, you know, have you ever divested in a class of stock or equities or debt that comprised that amount? >> it is 8.7 percent of our public holdings. >> which is roughly a little more than half of the total portfolio. >> right. >> sudan is the only one that i was here when the board considered it and the sudan divestment was not in it, in

tobacco, obviously would have been more significant in sudan but how it compares as far as the holdings that we had and the values of those holdings back and i will provide that to the committee but i don't have those with me today. >> i have articles seattle do this and is urging to do this and their holdings is $17 million out of 2 billion which is obviously, you know wha, is it 25 percent, we are talking about 8.7 percent and so in terms of if you were actually to go forward and divest, i am sure that there would be it would take a lot longer to do it and also i know that there is a five year built in here but it would take also, the risk of taking hits on that divestment and it would be a lot great and her harder to do i would imagine and that is ten percent of our portfolio. >> the staff has not undertaken that evaluation, we would need to be directed by the board to evaluate. what that would mean as far as time wise. >> i could tell you that sudan,

the process to get to a level three with sudan took approximately nine months of engagement at level one and two. and like i said, relative to these holdings it was a significantly smaller amount of holdings. >> okay. and now in terms,... >> the resolution does call for the retirement board to make that assessment. >> that is part of the resolution. >> and my understanding is that this is a non-binding to the retirement board resolution. we take our direction from the retirement board the staff does. >> that is right, that you just said the board of supervisors directed you. >> i meant the retirement board. >> very good. >> i mean, i misspoke, i meant the retirement board. >> i think that you said the board and you meant to say the retirement board. >> okay. >> and so they are my board. you are my board too. >> i understand. >> so let me ask you this, in any given portfolio, i mean, do you in your best judgment think

that the board and the portfolio can perform as well as it has traditionally without investment from the sector? >> without a complete analysis i really would not venture to answer that. >> okay. >> i mean that there are a lot of things where these are positioned and the alternative types of investments comparable risk investments and return, there is weight, and we engage our consultants when we do that evaluation and so i really would not feel comfortable giving you my best estimate. >> okay. >> thank you very much. >> so, some other questions and that i will do with in the past, have we ever tried to make reeninvestments in different divestments in tobacco, and we have divested it from companies that deal with sudan, and moving money from those investments to other investments what is the process and how has that played out in

the past. >> well, we have, almost most of our stock investments are obviously through the discretionary investments and we have contracts that we hold them to the performance bench marks in order to retain the contract. so the process would be the instructions would be to find a replacement holdings, that would be of the same profile, both risk and return profile, and that they would use that as an opportunity to replace the holdings that we would have for example in these companies, withholdings that would not violate the terms of their contract giving them the discretion against the bench mark but would return the same risk and the same return to the portfolio, so, the process of 500 million dollars being replaced, you know, i recognize that you had