[gavel] >> this meeting will come to order. this is the regular meeting of the government and audit oversight committee, and thank you for joining us to starting an hour earlier today. thank you, scott wiener. i'm supervisor london breed, the chair of the committee. i'm joined by the vice-chair supervisor katy tang and president chiu here today, and sweden supervisor wiener is also joining us as well. the committee clerk is lisa miller. and i want to thank jim smith

and jennifer low from sfgov-tv. and, madam clerk, do we have any announcements? >> yes, please make sure to silence all cell phones and electronic devices. completed speaker cards and copies of any documents to be included as part of the file should be submitted to the clerk. items acted upon today will appear on the april 22nd board of supervisors agenda unless otherwise stated. >> okay, are there any changes to the agenda? >> no. >> okay. so, can you please call the first item? >> item number 1 is a hearing on the san francisco employee's retirement system (sfers) investments in russian securities; the feasibility, consistent with sfers's fiduciary obligations to retirees, of sfers divesting from russian securities, given russia's continuing persecution of members of the lesbian, gay, bisexual, and transgender community; and sfers's policy regarding responses to inquiries from members of the board of supervisors about policy matters of interest to residents of san francisco. >> okay, thank you. and i would like to turn this over to my colleague, supervisor scott wiener. >> thank you, madam chair, and thank you for accommodating this hearing in terms of timing. we very much appreciate it. so, colleagues, today before us we are holding a hearing

relating to the extreme persecution of the lgbt community in russia that has been occurring for sometime now and having a discussion about whether it would be appropriate for the san francisco employee retirement system to divest of russian securities given the situation in russia related to the lgbt community. by way of background, colleagues, following the fall of the soviet union in 1991, russia liberalized some of its antilgbt laws including dee criminalization and same-sex relationships in 1993 ~ and a number of other areas as well. however, unfortunately in recent years russia authorities have done a 180 in terms of the lgbt community by, for example, routinely denying permits for pride parade, intimidating and

arresting lgbt activists and condoning violence towards lgbt people. ilga europe, the european section of the gay and lesbian and inter sex [speaker not understood] rates russia as the least protective city for lgbt citizens ranking it 49th out of the 49 countries rated in the annual survey. last year in june 2013, the russian duma in moscow passed a new law banning the "propaganda of nontraditional sexual relationships ~ to mine ores. this new law is closely related to several regional laws that were already on the books all of which seek to penalize "propaganda of homosexuality generally with the intent of "protecting minorses, which as you know has been for many years an argument ~ that

homophobes use [speaker not understood]. the language of the new law focuses on nontraditional sexual relationships to contrast with "traditional values or traditional family language." russian russia is promoting aloe ute u.n. positive tim statements of the human rights of lgbt people. the federal lgbt propaganda law as signed by president putin last june took effect in june of last year. in the federal law propaganda is defined as "distribution of information that is aimed at the formation among minors of nontraditional sexual attitudes, attractiveness of nontraditional sexual relations, misperceptions of the social equivalence of traditional and nontraditional sexual relations or enforcing information about nontraditional sexual relations that evokes interest to such relations." the new law sets up

administrative fines that can be quite significant and the more severe administrative fines are allowed for propaganda or apply to quote-unquote propaganda through media networks or [speaker not understood]. foreigners are also subject to 15 days imprisonment and deportation from russia. these laws unfortunately are reminiscent of laws criminalizing jews in nazi germany in the 1930s, and russia, unfortunately, has a very bad history when it comes to treatment of minority communities. for example, the jewish community experienced decades of persecution, extreme persecution under the former soviet union in the 20th century. and we know that even before

the soviet union jews were fleeing russia because they were being slaughtered [speaker not understood]. so, unfortunately this is not an isolated incident for russia. on september 3rd of last year, i asked director [speaker not understood] from the san francisco employee retirement system to detail the extent of san francisco's financial relationships with russia. i sent that request to other departments as well to determine if we have any contracts with russian firms. it appears that we do not have any such contracts. on october 11th, director hewitt responded as of october 9th, the retirement system's -- retirement system did indeed hold russian securities valued at a little more than $37 million, constitutesing .22%, so 2/10 of 1% of the total retirement funds.

on october 15th, i requested that the retirement system analyze whether or not it could divest from these russian securities consistent with its fiduciary obligation to current and future retirees. and i want to be clear that whenever we're talking about divestment, we always have to keep in mind that the retirement systems' first responsibility is its fiduciary responsibility to current and future retirees to ensure that the retirement system is solvent and is producing the returns that we needed to return. we did not receive a response and had a conversation at the full board of supervisors on march 4th, at which point mr. hewitt informed us and actually sent us a letter today stating that the retirement system will not engage in that analysis about whether divestment could be done unless a member of the retirement board actually makes that request.

so, colleagues, this is an important issue. we know that the california legislature passed a resolution authored by state senator mark leno requesting that calpers divest from russian securities. so, this is not an issue isolated to san francisco. this is an issue broadly impacting the lgbt community in this city, in this country, and around the world. we cannot sit back while russia continues to marginalize our lgbt brothers and sisters. so, colleagues, i want to thank you again for holding this hearing, and i will now ask that jay hewitt, executive director of the san francisco board retirement system address the committee. thank you for being here, mr. hewitt. >> thank you. members of the committee, supervisor wiener, good morning, my name is jay hewitt. i'm the executive director of the san francisco employees retirement system.

we have provided to you -- we have been asked by supervisor wiener's staff to provide a written response to his october request that we refinalize divestment from the russian system that the portfolio currently has. i will update that as of today. those holdings have been reduced from 37 million down to just over $26 million. these investments and these holdings are placed by discretionary managers. so, we're not sure why there is, you know, a significant decrease in the holdings, but i just wanted to update the committee that, in fact, now it's just over $26 million of russian securities that the portfolio has. as i pointed out in the letter, i believe that we have a strong track record of responding to requests from the board of supervisors for members of the public for information that is not covered specifically by a

policy. and the request to analyze divestment falls squarely within the retirement board's social investment policy and the procedures and policies contained therein basically state that a member of the retirement board must request that that be calendared for a hearingv. and as far as the status of your october request, i believe it's still a pending request. ~ i reported last night to the retirement board about the hearing today. they understand that it's an ongoing issue. they understand that it's still the request that -- your request to them is still outstanding and, so, we consider that it's not a closed deal. but as of today no member of the board or the chair of the board has requested that we calendar and conduct the requested due diligence. >> okay, thank you for that information. so, so, the reduction from 37 million to 26 million, would it

be fair to say i think by my rough math, assuming there's not been a dramatic change in the corpus of the fund, about .15% of the holdings, give or take, are now in russian securities? >> i would say that we have had not necessarily a dramatic increase, but i would say that's safe, probably very top of the line, it will be less than that. >> maybe even less? >> absolutely. >> so, a 10th of a percent or .15%? >> [speaker not understood]. >> it's a tiny percentage? >> absolutely, supervisor. >> it seems to me, and again, i'll reiterate and said it before, i'll say it again, we know the retirement system's top obligation is as a fiduciary for the funds to make sure that we are able to -- not just pay out the pensions to current and future retirees, but it's a healthy fund. we've all worked very hard to try to sure up our pension system. every employee in this room,

including us, we're all paying a lot more into the system and we care a lot about it, but we know there have been situations where divestment has been deemed appropriate. and, so, it is my continuing request that the retirement system do that. so, it is -- is it an official policy of the fund that if a member of the board of supervisors requests that the system engage in evaluation, that cannot happen unless the retirement board itself directs that it happen? >> supervisor wiener, it is a board policy that a member of the board can request any item to be calendared and that it would be calendared within a reasonable period of time. under the social investment policy, which is the subject matter of divestment in particular, actually exclusively, that calls for the board to direct staff to conduct the required analysis. for example, we have been working -- the board of supervisors back in april of last year passed a resolution

urging the retirement system to divest of their fossil fuel holdings, the carbon track 200 companies. that was delivered to us by supervisor avalos, delivered to the retirement board in may. we held the first hearing in response to that resolution. in october, we had a follow-up one in february. we're in the process of scheduling a third session ~. so, the way, you know, the way the policy works is this is the analysis to, to decide whether, in fact, divesting of $26 million is feasible or can be done. it has to be directed by the board as engaging in the social investment topic. so, that's -- like i said, i'm not saying that you're in the queue, but you're definitely on keeping your issue in froth of the board and i will report the results of this hearing to the board at their may retirement board meeting ~. >> okay. i do repeat the request. i've actually been having some

conversations with supervisor cohen who is our representative on the retirement system board. and, so, i will do everything i can to make sure that a member of the retirement system makes that request. i will say we had this discussion at the full board briefly. i have a bit of an issue saying that if the board of supervisors makes -- a supervisor or the full board makes a request that's somehow not good enough to trigger an evaluation by the retirement system. i understand the board can't direct the policy matter, but you do [speaker not understood] that is in the hands of the retirement system board. but it seems to me that if a member of the board of supervisors makes a request to consider something, it would seem that should be good enough. i understand what your policy is and we will certainly be working with supervisor cohen to see if we can move that request forward. simply for consideration. >> supervisor wiener, i can certainly assure you that a request from a board of

supervisors member is -- has an importance in front of the retirement board. like i indicated, there is not a queue, i don't want to represent there is a queue, but we have been -- the retirement board has been very actively over the last 18 months considering requests for divestment in bank holdings because the lending practices in firearms, and also in fossil fuel. understanding that the issue and the importance of the issue is paramount, like i said, we consider it and i will continue to keep it in front of the retirement board as a pending issue and a pending request, and i can't say, but i think that supervisor cohen as the board of supervisors representative on the board could certainly request it. >> okay. and supervisor cohen has been an incredible ally to the lgbt community. so, i'll continue having conversations with her. and i also just want to say, backing up from this particular issue, i think that the retirement system does a great job in terms of the overall

management of the system and, you know, in an era where you look at some of the -- we're underfunded, although we're moving in positive direction to get fully funded. when you look at some other retirement funds in this state and around the country, that are just in really -- at death's door in terms of the viability of those funds, we as a retirement system, i think the retirement system does a very good job and, you know, we have a real good discussion on this issue and we'll keep going there. but i don't want to lose sight of that larger context, so, thank you. >> thank you. i'll just update that we just received the report as of july 1st, 2013, and we returned over 13-1/2%. we crossed over the $19 billion market value earlier last month, and that we are continuing to take advantage of, of good market street. and you're right, our funding status had improved from under -- just under 80% to 84%.

so, relative to other public plans, you know, we are well funded, exceptionally well funded. >> thank you. >> thank you. >> supervisor chiu [ >> thank you. i want to thank supervisor wiener for raising this issue unless this be construed as one supervisor's request at looking at the retirement board, i'd like to join him in adding my support for that request given the antigay bigotry, given the civil rights and hate crimes that have been perpetrated by the russian government, i think it is entirely appropriate for the retirement board to look at this. the fact that you've already analyzed what our holdings are, the fact that they appear to represent less than 1% of our holding, it seems like you've got a lot of information. i have heard from community members who are concerned about what appears to be a delay in consideration of this and i'd like to add my support to that. my guess is supervisor cohen would probably also support that, although i have not yet spoken to her, and i suspect that many of us here on the board as well as the broader

san francisco community believes that we ought to lead the way with the state of california in saying that, that we have many other places that we can invest our monies and we need to consider appropriately a path of divestment if this behavior continues. >> president chiu, i'll pass on your joining in the request to president macris as well members of the retirement. >> thank you. >> thank you. anyone else? >> thank you, mr. hewitt. >> i have one comment or one question. first of all, i want to associate myself with the comments from supervisor chiu. i, too, take issue with where the city invests its money. i think it's important that we make a statement. as you know, we wanted to make that statement with fossil fuels and were unsuccessful in doing so. i know that you provided a report to the retirement board

last night, but members of the board of supervisors, we don't get notifications of information. nor is the attachment available online or provided to us from the meetings. and i think that's helpful to us to have access to information in order to better understand some of the steps that the retirement board is taking to deal with these particular issues. it is important that we make a statement where we put our money is important ~, and although we talk about it as it relates to the larger percentage, 1% is a small amount. it's still a big deal. $26 million is a huge amount of money even if it's a small percentage of the overall retirement budget. and, so, i do think it's important that san francisco continue to make decisions around how it invests based on how people treat other human beings period.

and, you know, the environment is important. the future is important. fossil fuels and how they're impacting our environment in the next generation, that's a serious issue. and i think we send the wrong message investing in the kinds of things that don't yield positive results or do anything in order to make our country better and in order to support our citizens on a positive note. and russia has clearly demonstrated that they're not a country that we should be doing business with. and, so, i just wanted to add those comments and ask for a couple things, a know supervisor cohen is on the board. but is there a way that we can open the communication lines a lot better with the retirement board? the thing that i mentioned, for example, the attachment, the follow-up in your director's report, and things that we express are important to us.

is there a way that we can develop, you know, some consistency in terms of dialogue between members of the board when thing are important to us come up to your body? >> chair breed, obviously we can improve the communication. we have the materials, background materials that we presented to the board as public documents that are available soon we send them out to the board, which is generally the week before. we can definitely add -- >> they're not on the website. >> they're not on the website. we can work to have them on the website. in the meantime we can make sure we definitely send over because it does deal with a resolution that the full board of supervisors has passed. we can make sure you get those material in advance of the meeting. and we will work towards getting those online available. i would say that there is one thing i would like to clarify. and to my knowledge, the san francisco employees retirement system is the first public pension plan who is actually engaged fossil fuel issue at a

level one. and as many of you are aware, it's a sort of a deliberative process and it's a step-by-step process, and their policy, the retirement board's policy requires that they try level one, determine that it's not making a difference, go to level two, determine that's not making a difference before they go to level three, which would be a decision to divest, or to stop investing. so, i would say that as far as making the statement, i believe san francisco employees retirement did step forward to at least engage them under their policy, which is step-by-step. and i think that we will continue to have meetings regarding the success of level one. and consideration of the board to, you know, escalate it to level two, and the process would provide that over time. and the board resolution gave us five years to divest, but i'm not saying there is a timetable here, but i believe that it is significant and the retirement system did hear the message from the board of supervisors and did respond

according to the policy. >> thank you. and i know this is a different topic, but i just wanted to -- we're moving down a road of discussing this particular issue and i want to make sure that the communication is open and clear and provided to us in a timely manner. >> i'll make sure that that happens. thank you. >> thank you. supervisor wiener? >> i want to thank you, madam chair and also supervisor chiu, for supportive words. just to be clear, it's not, it's not 1%. i did the calculation at $19 billion fund, $26 million invested in russian securities, that is point 137%. it's even smaller, it's a really small percent, but thank you for acknowledging that it is -- >> it should be zero. >> yes, i agree. >> thank you. >> okay, thank you, mr. hewitt. i appreciate it. colleagues, just a few speakers from organizations in the bt