horizon, but the issue is as fiduciaries they cannot automatically unless there was something that they could go into immediately, you know, remove the existings hold ings that we have. in addition to the purchasing of the stock is the instruction that we can give to all investment managers once the board directed us to do that and that would preclude any additional purchase of shares. the other would be on the index side if we were going to be bench marking and there were 200 companies that were excluded, the industry sort of cooperated on the tobacco side and they do have indexes that were recognized ex-tobacco and sudan they don't have index and so we would have to work to try to come up with a measurement in our contracts, against a bench mark where we had indexes that included these, and we would have to figure out how to measure the index with those excluded. >> do we have any ex-... i

don't want to call it fossil fuel companies indexes at all? >> not that i am aware of. >> to reiterate for folks, the retirement board, benchmarks performance against the indexes and that is how you do the measure performance. >> and that is how the managers stay engaged with us to make sure that they are meeting the benchmarks. >> and you think that five years is not enough time to figure that out. >> without the analysis of the extent of where these holdings are and what alternatives might be out in the markets, the public markets to replace these i really could not say. >> i have asked you for to ask about your opinion of retirement board members and i am going to ask you for your opinion now. >> do you feel that climate change is real? and do you feel that fossil fuel companies have had an impact on the climate change that we seem to be experiencing?

>> i will say me opinion that is my opinion and i will not play a role in the decision however, there is clear evidence that in fact, there is impacts to the environment based on activities of these companies. >> thank you. >> and do you think that our investments that we have in fossil fuel companies have the power to hold fossil fuel companies accountable? >> i would say that san francisco employment retirement holdings, probably not. and i don't think that they will necessarily miss our investment in those companies. but, i think that if we were to engage in other plans across the united states and the california plans and then our voice becomes stronger. >> i think that is kind of what is happening in seattle, san francisco, college campuses, seems to be building.

and that is exactly how this sort of unfolds, and that is, we can at a level one, vote appropriately on anything that comes before the share holdings, if that is not successful in changing the behavior, and i mean the policy for a reason has three steps and the policy is stated that they, the board wants it to go through the three steps, because divestment, they recognize back in 1988, and today, it is not necessarily drastic in the sense that it cannot be done but it is drastic in the sense of the impact or the potential impact of signaling to a market that we are going to be selling off $500 million of public holdings in these companies puts the retirement system at a disadvantage in the market. but, also, they have shown that they are not as, they make a determination that there is a social concern that warrants the policy, and they are not

afraid to go through the policy. >> thank you. >> okay. >> thank you, for your presentation. and answering my questions. we could continue on with public comment. and i have, other speakers that i would like to call up first before going to the cards. patrick gettis, from the emp erial group and followed by garben yabush. >> >> and sorry if i am not getting people's names quite correctly. >> hello. >> actually i'm paul solo patrick could not be here he thought that the meeting was next week and so he is in new york and i am taking the place so you did get the name wrong but for the wrong reasons. >> in order to keep in the time limit em going to read my remarks. >> i am a partner with a group and investment group in california. we specialize in quantifying the impact of social screening

on portfolio risk and return. earlier this year we did a study entitled do the investment math, building a carbon free portfolio, and we were tired of hearing arguments against the investment by veflment experts who offered no honest data or analysis to support the contention that the fossil fuel would harm the performance, the purpose was to quantify the risk and return impact of eliminating the fossil fuel companies from a stock portfolio, the former cfo and director of research and research at morning star as well as ironically a former analyst with the oil industry who is with amaco which is part of bp and he likes to say that the oil industry did a really good job of teaching him how to do the math and wants to share that math and the analysis of the impact. i actually brought the handouts and i will give them to you afterwards. but i have two slides. do you want me to give them to you?

>> i did not... they are hand outs so i apologize. >> we will ask you a few questions to extend your time. >> if you eliminate the fossil taoul companies from the portfolio and retract the markets the risk will increase by only one, 100th of one percent, the theoretical return for that amount of risk if you go back historically is less than one-third of a basis point. okay? and so screening will impact your portfolio by a small amount we can describe it as immaterial. >> so, do you have any response to the comments made by the director of the retirement fund about the risks that would be involved in terms of pulling funds from fossil fuels, stock, he talked about how that would

be, within the market and we are pulling that much money out in five years would be a great risk and lower our power in terms of using our retirement fund effectively. >> i think that one of the problems with this debate is that people are not measuring and in his defense he needs to study this and we are adding the study to the weight of evidence. but, no, i stand by the comment that it would, yes, it would increase risk by such an immaterial amount that it would be insignificant. >> could you go over that slide one more time. >> sure. >> what you have got here is on the left side, you have got the, on the vertical axis, if you exclude all of the oils, gas and consumable fuel companies. >> from the universe of available investments and put the portfolio back together again in order to track the russell 3000 index and this is just for domestic. >> why are you tracking that? >> it is the bench mark that most of us use on the u.s. side and have done the same index

for the all country world index which includes emerging markets. >> right. >> what you are seeing here is just for the u.s. and applies for the foreign and the analysis for that as well. >> okay >> what is says here is if you look on the first line it says that if you put hump ty dump ty back together again, you will track it (inaudible) per year and it is a measure called tracking error and what is neat is that you can convert it to a standard deviation risk measure tha, is the measure that all money managers do to evaluate that. if you do that, it converts to one, 100th of risk. and you look at the right side of the chart here and the typical active manager in the united states incurs 5 percent of the risk relative to the bench mark to try to beat the

market. that risk, adds 69 100th of one percent additional risk to the portfolio and so we have a industry, one of the most highly compensated grossly over, compensated, is tracking (inaudible) of its clients is not delivering any apha and so it is ironic that the industry is saying that you cannot do this when it will increase, when in fact they are delivering a level of risk. >> if this is this tracking error, is this assuming that the entire investment industry excludes all carbon? i mean, part of my question is, understanding theory and so forth and all of the standard deviations, however, the implications to the san francisco retirement board when we have 8 percent of the assets in one class and spread out

between that is equity. but, what is the implications for us if we are going to divest? >> the implication is not about actually about portfolio risk, it is not going to increase the portfolio risk, more than what the study demonstrates. >> how are you defining risk? >> standard deviation, the variability... the way, and it is an axium in finance that you get paid for taking a risk and the main me trick is standard deviation, and you budget to spend your risk in order to get the highest return. so, point here is if you do this, it will not increase portfolio risk now there will be costs associated with the deinvestment and there is unwinding of existing positions and i would maintain that five years is way more time than people need for doing that. >> so, fully understanding, the

risk management discussion, however, question about have you looked at and analyzed the historical performance of these stocks >> we have. >> would you like me to share? >> yes, i would love it. >> the second part of our study. so the second slide here summarizes a historical back test where we built a carbon free portfolio and looked at it for the 25-year period, 1988 to 2012, we eliminated all oil, gas and consumable companies from the investment universe and thes not on the slide here, but that was a total of 134 stocks out of 3,000. and what you can see here actually is the first lines that are above the 0 percent axis, those are the periods of time in the rolling ten-year periods where actually a fossil fuel, free portfolio, out performed the index. it is only been in the last five years that you have seen

that the carbon portfolio has out performed and it was interesting to us when the american petroleum institute came out and issued a study to talk about how dangerous divestment was and they focused on this five year period and so they cherry picked. if you go out and extend this many more years, i don't know what it will show you, this is the period that we had data. >> you are talking about you took the entire russell 3,000? >> yes. >> ex-ed these 134 companies? >> yes. >> is that right? >> yes. what does that look like if we bench mark against our index. >> the whole world and including emerging markets but not small camp we did the study for that too and it looks identical. >> okay, so where does this, i mean, how far are we looking back here in 97? >> we are looking back to 88. >> all right. >> okay. >> i can't read this slide as

well. >> it is actually rolling ten-year period and so the period extends beyond where the axis shows. >> so you have... what is the average in the difference? >> well, what we are seeing here is that the average... >> please... >> the average annual return for the ten-year rolling period showed an 8 basis point out the market. >> what is interesting is that in 73 percent of the ten-year rolling periods, the fossil fuel free portfolio out performed the market and we don't put a lot of stock in the back tests and we put a lot more emphasis on the risk, evaluation, forecasting the return is difficult if not impossible, forecasting risk if you talk to the academics seems to be doable and so we like the risk estimate and we showed this because of the industry wants to talk about it and the

american petroleum industry came out with a five year cherry picked that it would hurt the endowment to the college and so on. >> how would you explain the five years in terms of the difference? >> i am not an analyst, i just would not go there, to be honest with you. >> i don't know what was driving the out performance of the companies and i think that we know that the (inaudible) price and problems in the mid east and that kind of thing. >> thank. >> could i continue? >> so in summary, the fossil fuels will have an immaterial impact on risk and historically a carbon free fort folio would have out performed portfolio in the oil companies, how will it perform in the future? we have no idea. our best guess is that it will perform in line with the market sometimes higher or lower and no impact on risk. there is a question about tobacco. when the tobacco issue came up

with the perspective to the investment, the expected tracking error was around 35, 40 basis points. and the the expected tracking error for this is 60. so that will give you an idea of the order of magnitude in terms of the impact on portfolio tracking not risk. >> very good. >> thank you. >> thank you. >> our next speaker, let me see my list here. garben yarush? the committee member, rebecca solet and you each have three minutes. >> good morning, mr. avalos, did actually good, it is garben jay bush, for an unusual name you did good work. i am the co-founder and chief investment officer of greenhouse advisors founded

right here in san francisco. i am the manager of the shelton green alpha mutual fund which is a fossil free portfolio and so i would like to advise me that i don't have too much additional risk for taking that position, although i think that i am going to try to argue here in the next couple of minutes that being engaged in fossil fuels whereas he takes a traditional modern portfolio backwards way of measuring risk, understandable because the past is the only time for which we have numbers. we believe that looking forward we are going to see that the risk are so great that not only are you not going to see more risk by divesting, you are going to see more risk by staying invested in fossil fuels and we feel that strongly and that is one of two key points that i want to make, we can make a case that the security and fossil fuels are becoming subprime assets and secondly, that one no longer

needs exposure to fossil fuel to have the return or the so-called return of the modern theory and also note that i am the author of sierra club club.

contaminated water destroyed the farmlands and this is coming to an end. look at how much bp has had to pay for the water horizon and they have unlimited exposure via any suits, look at chevron, held accountable for 19 billion in ecuador and they had to take the expensive step to move out of ecuador to protect their assets and it is not working. ecuador is going after them and other nations. so, on the contrary, the imf said that in 2011, the united states gave 502 billion, half a trillion dollars to fossil fuel companies in subsidy and other benefits. one images that the willingness of the taxpayers to lavish this kind on the fossil fuel companies would come to an end. >> if you could just take a moment to finish your comments. >> sure, thanks. >> also we have already seen china impose carbon tax and from a purely capitalist point

of view, shell oil has noted that fossil fuels are going to make-up as much as 37 percent of total energy used over the decades where renewables. considering the tiny scale of the fuels, the tiny scale of renewable scale. and i know that as an investment manager, that one is stealing the market shares and i know where i want to place my bets. >> thank you, thank you very much. >> next speaker, please? >> good morning. my name is rebecasolmat and i am a history writer and i am an author of 13 books, many about the city and thank you for letting me sit here and thank you supervisor avalos for your visionary leadership. i want this in the history of the nation and the identity of the city and to be against slavery in 1840 was to be a

dreamer and a radical and a political extremist, to be against in 1940 was to be a common, and decent ordinary human being, abolishing slavery erased 4 billion dollars in privately held assets, and doing so did not come easy. you can't compare fossil fuel stocks to slavery, but you can look at the brutality and injustice, climate change is killing people on a large scale now from displacement, famine, fire and storm. it is killing people through toxic air and water and political violence and destruction of home. we are in bondage to the companies that have under minded our democracy and sabotaging our future in the water and land in the nation and our planet. i make the comparison to slavery because we must make profound changes on what some

may portray as extreme impractical and will seem like common sense insanity in a little while. you can get on the right side of history earlier but there is no question at this point which side is right. all of the remaining arguments are about details. policy and profitability and precedent. and about not shifting the status quo. but we know that the fossil fuel status quo does not represent stability, it represents growing catastrophe. how can we insure a comfortable future for the civil servants by investing in the destruction of our future. san francisco has a history of setting an example in leading wait in the united states on ecological issues. we are where

the battle for marriage equality was launched in this very building nine years ago and we are a sanctuary city and a city of vision and catalyst for change what happens here does not stay here it spreads. i believe that the climate change movement is on the cusp of changing the world to make a livable future. every single one of us has a role to play and for the board of supervisors and the retirement board today that role is to see that san francisco purges itself from the holding in devastation. >> thank you very much. next speaker, please? >> hello my name is rupa maria and i am a physician and professor of medicine at ucsf. there is an expression that i

learned is the expression of fuba or found on earth barely alive and what refers to a tragically common experience, while orthopedic surgeons were busy replacing knees they forgot the principles of keeping people alive on service like giving them food and water, it seems hard to believe that you can go to school to learn to be a doctor for 12 years and forget this basic thing, but we suffer as a culture from tunnel vision and as dak tores we have had to learn the crucial importance because there is no future for a patient whose knee is replaced if they are not kept well with the basic necessities of life, people are saying because of climate change the planet is sick, sighting worthy vents as evidence. that is not so, it might be sick as us, but the planet is

fine, it can. what is suffering is our place on the planet which is fragile and other organisms will manage and thrive at the higher temperatures, like the mosquitoes that are spreading disease at alarming rates as the temperatures continue to climb. what is in peril is the future on this planet and the future of our children, we must recognize that what is needed to address this crisis is not simply the tunnel vision, but rather a piercing look at the whole and a overhaul of these factors, political social and economic that have put us in the situation in the first place, san francisco is a city that inspires people around the world as a beacon for visionary change and we are behind the times of other cities that have taken more approaches to address in climate crisis, i am asking the city to exist the

courage needed to divest the pension funds from fossil fuels and stop to feed the cause and put that money into the sustainable solutions that offer a cure, i am asking the city to say how we can do this with you our civil servants. andism asking for this for the hel thing of the whole, this city and this democracy and our place on the planet. thank you. >> ofer obruk and nick gaceti and there is a member of the committee that i called up as well. >> say your name. >> my name is antoio (inaudible) and i represent the tribe and chief (inaudible) and over 2,000 members of our tribe and all other members of other tribes that have families here in the bay area. i want to say that the

divestment of any fossil fuels at all levels by anyone here or everyone here that is able to do something about it, i would ask and urge to do the right thing, for the future of all generations. and i would like to it you for this time and for this hearing. and i say thank you in our language... [ speaking in a foreign language ] >> thank you. >> hi, everybody, my name is ofer, brock and i study environmental science and policy at uc berkeley. so the science of the climate crisis has already been discussed as have the financial and moral arguments and so i am here to speak about the student-led movement that have emerged due to inaction of the official level and stands at

300 campuses throughout north america, at uc berkeley we have been campaigning to remove the university's endowment assets from the fossil fuel industry for nearly two years and have made several strides in the last six months, for example, this october, our student government would control between 3 and 4 million in assets, to divest its assets from the 200 largest publicly traded fossil fuel companies. 3 other ucs have passed similar resolutions show casing growing support of divestment, as a powerful tactic in the movement to halt climate change and advance climate justice. in march, a coalition of students from several ucs addressed the uc regents and we will continue the dialogue to divest it 70 billion in assets in may at their may meeting in

sacramento. >> we are urging them to take up the leadership in this movement. we are calling on the students of san francisco to continue the tradition of progressive action in the realm of environmental and social injustice to join other cities like seattle and move this resolution forward to divest from fossil fuels and reinvest in just and sustain able ventures, i can assure you that if the board moves forward with this resolution, you will have the unwavering supports of hundreds of thousands of students across the bay area as well as across the nation, thank you for your time. >> thank you very much. >> next speaker. >> and before that speaker, goes on i will name a few other cards. hunter cutting, ash len, ruga, katie hofmann, and jes derban ackerman. >> my name is nick, and i am here on behalf of (inaudible)

asu and i look out and i want to thank anyone here representing this movement today and i would like to start by saying that divestment is important to us. there is a lot of phrases that can be used one that i particularly like is taxation without representation. and this is something that we need to address, failing to address this will go against everything that we as environmental studies etc., the students are learning and that has inspired us to lead a campaign of our own and we are in the process of drafting the resolution asking the demands that the other students across the country are and those demands are halting investments in any fossil-fuel related companies and withdrawing all investments in five years and moving towards the world that, you know, we wish this live in because this is a human rights issue and this is something that can't be ignored any longer and we urge you to divest as a city as