October 1, 2:36 PM click here to comment > 5
Next Steps on Fossil Fuel Divestment
Last December, I outlined the actions the City of Seattle was taking to begin divesting from fossil fuels. Since that time significant progress has been made. Sixteen cities from across the country have joined us in committing to fossil fuel divestment. We’ve also moved forward on a number of fronts here in Seattle.
We stopped investing the City’s cash balances in fossil fuels last winter. Since then, the City’s Deferred Compensation Plan has determined that they can add a new fossil free investment option so that City employees participating in the deferred compensation program can choose to invest their savings in fossil free investment funds. In addition, the Retirement Board commissioned and received an analysis from their financial adviser on divesting from fossil fuels and assault weapons. Based on the recommendations in this report, they have adopted a policy on how to assess and incorporate socially responsible investing into the City’s portfolio.
In discussing the next steps on divestment with the City’s Finance Director, it has become clear that the path forward is not without obstacles. While divestment campaigns have been successful in the past, such as in ending apartheid in South Africa, removing funds from a sector of the economy as large as fossil fuels has never before been contemplated. As managers of the City’s pension system, the retirement board has fiduciary responsibility for the investment portfolio. State and federal law on fiduciary responsibility requires board members to only invest funds to achieve a social or environmental objective when the resulting return on investment and related risk are comparable to other available investments. The market for fossil free investment tools is still new and the pension system’s financial adviser believes that existing tools do not yet meet the legal requirements.
I agree that it is important for any changes in the investment strategy for the retirement system to meet a high bar for performance. After all, we want to do right by our employees and retirees, providing them with a secure retirement. However, we must not allow the perceived implications of fiduciary duty to prevent us from acting. I believe that over time, fossil fuel investments will prove to be highly risky and ultimately, continued investment in this sector will yield strong negative impacts for investors as well as society. We must begin now to map out a strategy for divesting from fossil fuels in phased manner that protects our retirement system, and meets our moral obligation to future generations to stop the devastation of climate change.
I’ve also heard from other cities that have committed to divestment that they are finding similar challenges. For that reason, I am convening the Seattle Divestment Forum this October 17-18. The Forum will bring together local government leaders, staff and financial professionals for a dialogue on divesting from fossil fuels. The forum will provide a unique opportunity for city governments and the institutional financial sector to interface on the components and implications of fossil fuel divestment. Investment experts will provide empirical arguments and address concerns of institutions considering divestment or simply interested in becoming more knowledgeable about the topic. The Forum will explore the costs of fossil fuels investment, risk and diversification, return, fiduciary implications, and reinvestment as they pertain to fossil fuel divestment.
My intention with convening this Forum is to bring together the decision makers from cities that are committed to or considering divestment to learn together and map out the path forward. I believe we can also demonstrate a strong demand for fossil fuel free investment options that will drive the financial markets to broaden the options that are available, making the transition to a divested portfolio possible in the coming years.
There’s still much work to be done, and I am proud of the role Seattle is playing in leading the movement towards more sustainable investment practices. Along with many other efforts across the City, this work adds up to real action to address climate change.
Posted by: Mayor Mike McGinn