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tv   Government Access Programming  SFGTV  April 14, 2018 4:00pm-5:01pm PDT

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separate item. >> i'll move approval. >> second. >> second. >> discussion? public comments? all in favor. >> aye. >> opposed. pass passes. no closed session. do we have any other new business from the commissioners? with that, this meeting is adjou adjourned. thank you.
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>> should we call the meeting to order. will everyone please rise and join us in the pledge of allegiance. i pledge allegiance to the flag of the united states of america. and to the republic, for which it stands, one nation, under god, indivisible, with liberty and justice for all. >> roll call please. >> commissioner cohen, commissioner bridges. commission driscoll, commissioner mack. stance bury. >> present. >> great. we're going to go into closed session. before we do so we'll call public comment.
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is there any members of the public that would like to address this. we'll close public comment. anyone who does should we call the meeting back to order. we're reconvening why closed session. is there a motion on the table not to disclose. >> second. >> we take the item without objection. did i get a look we have to calt the look i got, all right. can we take item without objection? great. item passes. mr. secretary, next -- why don't we go to item number 7. i know i jumped over a bunch here. forgive me, i'm sorry. let's go to the next item, which would be i guess item number 4. general public comment. >> thank you. >> my name is johnstonson, i'm a
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43-year member of our retirement system. i'd like to tell you consultant manager's joke. why do investment consultants out live their living. they take the same investment advice they give to their clients. i like that joke. you liked it, right. good. anyhow. when it comes to investment advice, the worse investment advice that you have taken is to invest in hedge funds. if you recollect, this reason your edge fund sales men said they will give you market protection. well, 2008, is a third largest down market in the stock market history. and the vast majority of hedge funds lost money and hundreds of
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them lost money and they went -- a lot of them went out of business after loosing their client's money. warren buffet said it's simple math by hedge funds won't out perform the s&p 500 in the next 10 years. simple math. the math is, it's projected over the next 10 years the s&p 500 will have a annual return of 8%. ok, they go to 8% from hedge funds, you have to get 11%. so if you are hung funds get 11%. i'll take you all-out for lunch in the most expensive restaurants in san francisco. >> great, i have a speaker card for paul grey. >> thank you. my name is paul, i've been a
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city employee for seven years now. i'm not going to be here foray agaiforagenda items 12-14. there's still only one socially responsible offering under the 13 core and out of the three i believe that are being introduced either recently, this is our money and we should have more options in which to have a balanced portfolio. if i only have one large cap it's not a balanced portfolio. this forced me to enter the self broker route, which i have to let you know is not user friendly. it takes a long time and i believe it was designed that way. i am happy to report i just made my first investment earlier this week and i'm happy to share with your staff my picks if you want a little help in getting some more options into the core account. i reiterate, please, give us more options as city employees. one is not enough. finally, i'm excited about item number 7, i hope i can stay long
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enough. especially the part 4, the increased level to engagement. i'm interested in hearing how many fossil fuel companies you've reached out and met with and how many shareholder resolutions you've put in. due to this an hour and a half beyond what most people would expect to make general comments, could you do an evening event. you might get a public participation. most of us work for the city and we can't make the time to come here. it would be great if you started closed session at 3:30 and allow folks after work and make some comments. thank you. >> thank you. are there any other members of the public that would like to address the commission under general public comments? >> herbert winier. i don't know victor mackross is going to show up at this meeting but i want to praise him.
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victor was an exemplary poll tar yan. it's very necessary with this board, because this board cannot suffer from group think. where you think alike, act alike, vote alike. you can't do this because investments are on the line and we have to get the best possible return. and victor acted on his own conscience and it may have been upsetting to some members of the board but he was an independent person. he shown similar behaviors on other city boards. hopefully his replacement will display the same behavior. so you may not be here but i think he at least deserves this accommodation, thank you. >> thank you. >> good afternoon, claire representing the retired
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employers of the city and county of san francisco. i'd like to echo what my colleague herb winier said and i wish that commission mack ross was here. the port's gain is our loss. he served well and he has served this city for many years in different commissions but i think he actually was a vital and very significant member of this board and most of the time, well, there were a lot of times we didn't always agree but many times we did and i thought he represented the members and constituents of this trust fund very well and he was very serious about his fiduciary responsibilities and his due diligence. we appreciated that very, very much. and so we wish him well in his future endeavors but, we look forward to a new commissioner and we'll see how all of that goes but we really do need to say on behalf of the employees
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we feel that the commissioner was one of the more exemplary members of this body. thank you very much and thank you to victor. >> are there any other members that would like to address the public. we'll close and next item. >> an action item for the march 14th, 2018 retiredment board meeting. seeing none we'll close general public comment. is there a motion on the floor. there's a motion. is there a motion to adopt them. item passes, mr. secretary, next item please. >> are there any members of the
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public that would like to address the commission regarding the consent calender. we'll close public comment. is there a motion on the floor. there's a motion. a second. any discussion on the consent calender. seeing none, can we take this item without objection? item passes. mr. secretary, let's go to item number 7, please. >> discussion item update on six strategies to address climate risk and the portfolio. there cokier. >> very good. >> before we start, let's call for general public comment and give the public a chance to get up and talk. members of the public that would like to address the commission regarding item number 7? i do have a speaker card, would you like to get up and address the commission.
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>> thank you, president stance bury and commissioners. certainly the president has the prerogative to run the meet however he wishes or she. i would suggest the public is able to provide much more informed and useful comment with the benefit of as much of the presentation and as much of the commission discussion as possible otherwise it increases the political theater aspect of this and reduces the level of engagement that is meaningful and possible. i would say on the staff report, which i have reviewed, and the minutes of your january meeting, you did indicate that you were going to outline the riskiest and dirtyist investments. i see here you've made good progress on definitions of what risky and dirty might entail but haven't pushed through those to
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your hold organize the carbon underground 200 list. also, seeing the minutes from the january meeting that you were supposed to at this meeting, outline a plan for a divestment process. that was not meant to indicate your financial divestment plan but i don't see that in the work product that was produced today. certainly, you know, increased level to engagement, these things are steps. we can argue about the utility of those steps at this late date but i would definitely point out that none of those certainly relate to outlining a divestment process of any kind. ultimately, i think we're really behind the eight ball. i think you are going to be probably passed by other pension systems, not that that's material to our work here but i don't think a carbon constraint
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strategy -- i don't think allowing the market to determine the orderly transition of these assets is appropriate. thank you. >> thank you. are there any other members of the public that would like to address the commission regarding item number 7? seeing none we'll close general public comment. >> thank you, president. and i'm going to ask kirk to make opening comments and turning it over to our colleagues from gold man. >> during the january 24th board meeting, climate risk were approved. progress has been made towards each of these strategies and the purpose of this is to update you on progres progress on each of . i'll read them and we'll address them in order. first was adopt a carbon constrained strategy. the second was to hire a direct o'er of e.s.g. investing.
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the third was to partner with key institutions on carbon reduction initiatives. the fourth was to increase engagement activities. the fifth was to pursue renewable energy and carbon constrained investments and the sixth was to design an approach to first identify the riskiest and dirtiest fossil fuel assess et cetera replacing them with better performing clean assets. quickly i'll take us through progress made on the first five of these and we'll have john speak about framework for identifying the dirtiest and riskiest. >> certainly. item number one, we have done two things. one is we have implemented the carbon constrained strategy that goldman sachs is now managing as
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of about a month ago. it is for $500 million that reduces the carbon emissions relative to the russell 1,000 by 50% and otherwise it's sector neutral with minimal tracking. the second thing we're doing, which will be done in item 8 or 9. is that rear recommending an investment for $500 million in generation investment management. generation is a sustainable manager with a long proven track record and that reduces carbon by 07% to 80%. so between the two at a billion dollar total we will at reduces carbon emissions between 60 and 65%. there are other terms on item number 5, which curt will
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discuss a little bit later on. >> item number 2 is hiring a director of e.s.g. investing in late january. this is consistent with item number 3, we partnered and saw advice from institutions to develop a job description, a job description was formally posted mid-february. it was open for 10 days. over that 10-day period we received 50 applications that met our minimum qualifications. since then bill and i have interviewed a number of people. we've narrowed our search down to a handful. several have met with jay and senior members of investment staff and we expect to state or make an announcement about a hire effective at end of this month. >> or sooner. >> items 3 and items 4.
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partner with key institutions increased engagement activity. progress will pick up when we hire our director. i want to point out in respect to engagement activities, it's been our policy as voted proxies in line with incr resolutions. sorry. >> that's ok. where are we now? >> for some reason this won't page. it scrolls down. >> partner key institutions. >> so our partnership, in many of these initiatives, it will take place and pick up speed when we have our district or investing on board. the partnership to date was helping us come up with job descriptions for our investors. increasing engagement activity will be a priority for our director of investing. we are, however, voting our
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proxies or voting for incr resolutions. there are eight that were actually filed. all eight were rejected yet we voted for them. i will say, however, and maybe john can comment on this, there were 47 other i.n.c. resolutions they submitted for which we voted affirmatively which were ultimately polled for the proxy date because the companies agreed to them. so there's activity that's behind the scenes so to speak. finally, the pursuit of renewable energy and carbon constrained investments. we have one investment recommendation that will be again items 8 or 9 later on today. which is the emerging markets manager. it's worth noting, we believe this manager has no exposure to
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the carbon underground 200. earlier today we talked about a potential investment with a buy owe technology investment manager again, no exposure to the carbon underground 200. >> that would be another $500 million with 0% carbon emissions. >> that is in addition to item number 1, yes. the aggregate between those four investments is north of 80% reduction in carbon emissions. >> i'm going to turn it over to john and the team from goldman sachs. we've spent the last 10 weeks working with this team to design a framework first for
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identifying the dirtyist and riskiest fossil fuel companies. when we've green upon that framework, we can implement it and identify those k the first step is to design that framework. >> great, thank you. good to be back. i don't know if there's a way to scroll down to get as much of this on screen as possible. i think as curt said, it's been a pretty rapid fire approach to work with staff to come up with a broad approach, think about sources of data to populate that approach. think about data methods, when you have the data how do you weight all that stuff. along the way, work with staff and other parties to get input. there's been a lot of good work on this and a lot of good ideas so talking to people from non profits, folks like carbon tracker, we sat down with the world resources institute, internal colleagues and others. fundamentally the approach is really grounded in for dirtiest
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five key elements. one is the dirtiness of the current reserves mix. so carbon underground focus on fossil fuel reserve, this is the carbon intense tree of reserves in the ground, owned by these companies. and those vary and differ. number two, the carbon intensity of the current operation, the dirtiness of the current operations because there's what is in the ground and the carbon in that but there's the process to get it out and different companies operate with different levels of efficiency. so there's the sort of the future emissions and there's the day-to-day operational admissions. the third is trajectory. which is once again a point in time is one thing but part of this is the sense of some companies are taking a fork in the road. so wanting someone that picks up, not just on a snapshot in time but on the movement. who is migrating in one direction and who is migrating in another. the fourth is looking at governance and really trying to
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get measures and this is where we are non-profit data source that's have looked at some companies that are engaging positively around climate policy and some less constructively around that. to use that as an cater, both of the movement of the companies and their posture towards these issues and number five, things are negative incidents that have happened that could touch things like human rights, corruption, pollution, spills, those sorts of issues. trying to really understand from both of the conversation that text from the board in terms of dirtiest, what does that mean? so those were the five buckets really coal h he coalesce to tht what that means. on the riskiest, really looking primarily at financial measures, particularly looking at leverage. if you think about it, the dirtiest analysis is understanding the risk companies may face in a low carbon transition. the riskiest is how resilient are they in the event of these. the goal is putting those two
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things together. that's the basic conceptual approach. within that really looking at these different data sources to feed into it. different data methods, ok, this is worked with the team and really driving this and realizing it's sensitive to that. if you -- we had one thing that raided the controversy way too highly and so it was entirely driving it and you have to get the balance right. and we do want this external feedback and so talking to some of these non profits about the method. as the method refines, right, as you get clear on what you are doing, the data you are doing and how you are sort of waving the data, then we'll go backout to some of these non profits to folks to sense check it. you know, against both the non profits and some of our investment colleagues that know these companies really well to see, we want a rigorous fact-based quantitive method to do it and we want to check it against reality to see if it's working. it's creating the method and the engine and bounce particular off of people and this process of
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tweaking refinement so we'll be on track to have a real live list that's been its rated and refined with real feedback from real people on schedule for when it's due. which i think in the calender is the final version is october. and i think the other thing that will work well the timing is with the hire, because ultimately the new hire is going to be embedded in this and needs a ownership over this and to pick up this work and obviously we're going to continue to support and be helpful, but it's something they can own. on multiple levels. it will be a useful platform to drive engagement with the climate 100 plus and others. to the point about frankly leadership among other pensions, i think there will be tremendous interest in appetite in some of the thinking that goes into this amongst others. that's not what you are shooting for, you want something for your own portfolio but this will have broader resinnance. anything major i glossed over or got wrong or missed? >> all correct.
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>> board members, any questions on status and updates on these six action items? >> i have a question. where do i begin? so, this is -- first i'm going to start with the adopt a carbon constraints strategy. i see there's 500 million of passive equities into the low emission strategy. and so the question is how is this -- how is the index selected? it's really simple and straight forward. reading the slides doesn't necessarily answer that question for me. what is the criteria you use? what other strategy funds were
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considered? >> john, can you help address this? this is just remodifying the existing index with some sector constraints tracking air constraints just describe how you built this model. >> how this works and it has similarities to what work state did is the idea of how to optimize what you want which is reduction in current carbon emissions. with as little added variability ready to your policy. so maximize bang, of incremental tracking here. so effectively with the engine takes the russell 1,000 and then it reweights the constituents of that basically under weighting companies that are inefficient and over weighting companies that are more efficient. it does in a way that accounts for where there is a correlation so if you just under weight it all, the utility stocks and over weight in financials you have lots of tracking and something that doesn't look like your policy benchmark.
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so it optimizes within sectors so let's over weight the cleaner utilities and the dirtier ones under weight. that's how it works. so it's targeting a 50% reduction in carbon emissions relative to the policy benchmark. >> ok. i should have probably started with the thank you. [laughter] thank you for putting this together and making a way out of no way. this is a great start. although, when i was going through the files left with a desire for more with a greater level of detail. so back to my original question, what other strategy funds were considered? i don't think you answered that one. i don't know, john, i'm looking at you. >> yeah, um -- so -- >> is there hesitation because there were none that were
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considered or so many you can't tell me? >> yes and no. it's more the former. you know, we do an existing investment in the msci fossil fuel strategy. that is not a constrained strategy relative to sector weight and tracking error and the like and this strategy takes that into account. so it was to -- when i first heard this strategy from john, i thought it was very insightfully done and that without taking any tracking error relative to the index, any tracking error to speak of, it's about 10 or 15 basis points, is you are reducing carbon emissions by 50%. to me that's a very significant reduction in your car bon footprint with very little impact on your returns and the
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underlying characteristics of your portfolio relative to a benchmark. >> ok, so, where was this money previously invested? >> in the s&p 500. >> ok. >> to go back to your original question, we found this strategy because of the work they did for new york. we brought them before the investment committee and they made a presentation. when we came back in january, and made the recommendation to do a billion dollars and a carbon constrain, we embedded in that recommendation that we would use this fund, the customization they did was to meet all of our other e.s.g. restraints, i believe for tobacco, for sudan, and so that is why they needed to customize what their product was they're using for new york for our
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purposes to meet the other constraints and the other restrictions this board has adopted. it's always been embedded since we introduced you to goldman sachs that this was where we intented to invest the money to get the carbon constraints strategy. after the january 24th, we have been successful in negotiating an agreement with them where they can manage up to a billion dollars in this carbon constraint fund and they are acting as our consultant and helping us develop the definition. i want to make it clear that, you know, there was not an r.f.t. process for this. we discovered -- >> that was very clear because i had more questions about that. >> right. and we didn't need to go through an r.f.p. process for this. and so what we had identified was something that we wanted to present to the board as we believed as an effective way to
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reduce ar bon i carbon in our p. i want to make it clear that part of our six recommendations included investing up to a billion dollars in this fund in particular. after they customized it for us to meet our further restrictions under our policy. >> a few more questions. where was the money previously invested you said s&p 500. is it concentrating in a particular pocket or melting. >> no, ok. you guys are open to a recommendation of transitioning the 500 million to the generations global equity strategy? that's just my little pitch there? >> that's a recommendation that is coming up later today.
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>> that's a recommendation. that's a recommendation i'm supporting. i like it. >> ok. >> i'm sorry. >> good. >> it's the cold. you probably can't understand me. even my thoughts are clouded. s the plan to do this with the index equity strategy, which is currently $3 billion. so the benchmark is is msci world benchmark. why use a different benchmark against the rail is measured? >> that was on the previous slide before us. >> so we -- >> yeah. >> i'm sorry, commission, could you repeat the question so i understand it. >> so why are we using a different benchmark than the
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russell 1,000? >> we are using -- >> the msci that you are referring to is our benchmark for the entire equity program. >> that wasn't clear to me. >> since we had a billion dollar managed passively, we wanted to keep that passive portfolio or keep that amount in large cap u.s. stocks because of the to a russell 1,000 passive portfolio,al be it with the carbon constraints. the mcsi is our global benchmark for the entire equity portfolio. this is just a piece of this. do you have a plan for the active equities? >> the active equity that is generation coming up that's an
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active equity strategy. the two strategies that we highlighted on number five which is coming before the board here later today and the biotech strategy that we can't refer to that the board discussed in closed session, those are also active equity strategies. so in a few months we will have completed one index carbon constraints strategy a second active strategy and two others that have no carbon constraint. no carbon emissions. >> thank you. >> any other questions from the board? >> go ahead, please. >> first of all, thank you very much inform bringing this to us and bill, thank you to your team. at this so gold man and the team for putting it all together. i guess my question going back and i was trying to look back over my notes from january, i'm
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happy where we are with the hiring and projected hiring the part in terms of getting to the the the level 2 we've voted on and adopted. what do you foresee everything that you have on the timeline, do you think what the target date? >> so, the key action to increasing our engagement is hiring the director of s.r.i. right now, that is being done as a piece of everybody's job and i can truthfully say everyone is over 100% 'em employed. and so it will help to have a dedicated resource that this is their job. >> execute on the plans and work with those. >> we expect to have that position filled this month and
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amongst the action there's going to be a handful of actions that that person will do in the first number of months and one of those will be also to hire an admin person to help them manage all of these activities. so we will go from a zero person dedicated team to two. >> that will help with this transition. >> it will help. >> and level 2, as you will see, is mentioned here but also in the executive director's report. the proxy season has started. there's nearly 200incr sponsored resolution that's have been introduced related to not only climate risk but other serious issues. we are tracking them. we will be providing monthly reports through the end of the proxy season as to whether we're following our policy to vote in favor of them and we're reporting that as of the end of march, that we have voted in favor of all of those. it's only a handful, about 10?
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>> i noted earlier there are eight that got to proxy. >> that's what i.s.s. has that -- >> having to track it separately but they're the ones that built the proxy and vote our policy. so monthly, we'll provide that and like bill said, when we get additional resources whether it that we co author a resolution for the next proxy season, you know, if that is an escalation of level two involvement, that certainly would not be off the table for us. >> may i have a follow-up question. do we have a strategy to have all of our proxy efforts and votes ton esg issues not to fail? >> that's why we vote in favor of them. we can't control whether they fail or not we are going to be, and you will notice this year in
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my report as well, we're actually reporting the outcome and we're getting some of them that are getting very close to a 50% margin, so you can measure the progress. they might not have passed this year but they're getting closer than they were last year. and so again, we're voting in favor of it in order to make sure that as a shareholder we meet our obligation. >> the increase in engagement activity will fall under the new e.s.g. director? >> yes. and the staff person that -- the analyst that that person would hire. >> how close are we to hiring this person? >> i just got notice during the break that he has passed the finger print test with the city. we made a contingent offer based on the facts that he could pass back grounds. and we did get word that he successfully passed back grounds
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so we anticipate making a written file offer to this candidate as aeromexico as tomorrow. and i anticipate that he, based on our discussions would start before the end of this month. >> ok. we just can't announce it. >> i'm going to back to the third tab. partner with key institutions. i was wondering if any of the partners listed new? or is this our same old partners? >> they're not new. it would be the primary role for this director. >> all right. >> climate action 100 is relatively new. it's within the last six months it's been introduced. >> ok, you don't have to be defensive. i'm just pushing. >> i have a cold too. it's not defensive.
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>> i'm pushing it to get there. >> it's more robotussin. it's not defensive. >> is the partial list. >> ok. >> there are some foundations that we interact with, we just can't list them in public. >> all right, thank you. >> commission driscoll. >> this relationship with goldman sachs, you did that because of the first recommendation that says adopt a strategy? >> did you use that to hire them? >> exactly. >> ok. well that is horse on me for not understanding that word. let me ask this next question, the money is being transferred from the s&p 500 index fund to their product. has that transfer occurred? >> yes. >> what is the cost differential
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for that product? versus what we were paying before? >> about six and a half to seven basis points. >> one of the other warnings agreeing with any p.c. told us, this change in the total portfolio might effect us up to 22 points in return? >> that's correct. >> so, was that the lowest cost option. >> there was no other strategy in the market place like this in the sense at that low of fee, you have low tracking error and a reconstituted inns dex using, you know, pretty robust data. no one else has a strategy like this right now. >> i'm pursue my own confirmation in that state. the 22 basis points is a big number to deal with let alone global warming that many of these environmental carbon heavy industry are causing for the
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world. i believe that 22 basis points was if we divested from our fossil fuel holdings. this is a switch from a carbon constrained passive strategy, which is not included in the 22 basis points analysis that any p.c. presented. >> it was on the plan as a whole, it was six basis points on 500 million. >> right. >> to be clear, that 20 to 25, 22 was on the equity? >> can you just clarify that statement, please. >> the estimate in our study only pertained to the equity portfolio. the reduction of 22. i think we said 20 to 25. but it only applied to the equity portfolio, not the total plan. >> you say applied to the equity portfolio, if it was diversement. >> yes? >> any other questions or
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comments for staff? great. thank you for the report. we will see you in october. mr. secretary, what is next? item 8 an action item. action item, recommendation to hire for an investment of up to $500 million in its global equity strategy. will cokier. >> very good. board members, this is a sustainable investment recommendation. generation investment management was co founded by former vice president al gore and david blunt, former c.e.o. at goldman sachs. strategy has about a 14-year track record. marvel us track record at that. i'm going to ask curt to introduce the item and then havn
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martin is going to weigh in as well. >> risk of repeating what bill just said, investment staff is recommending $500 million in generation global equity strategy. >> may i interrupt? >> a copy. >> right here. >> heavy. >> do you have an extra copy? >> here, can you have mine. >> is yours missing? >> it is. >> thank you. >> generation is found inside 2004 by former vice president al gore and former head of goldman sachs as set management david blunt. the strategy is integrated sustainability research in a traditional financial analysis. the strategy launched in 2005 it was closed and has been hard closed since 2010.
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capacity just recently became available. we have an opportunity for a limited time to invest with a prominent sustainable manager. i'll turn it over and introduce it. >> it recommend this up to 500 million generation global equity strategy. the strategy has been closed since 2010. i know generation from a prior relationship and invested with generation previously. when i joined here in 2015 i put our name on the wasting list and it was only available in the last couple of months. it gives us an great opportunity to invest with a leading global with excession returns. but also leading pioneer and sustainable investment. they reduced their carbon emission in their portfolio been 0 to 80% versus their bench mash and the c.i. world.
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they also do -- they're thought leaders and promoting that area of investing. generations investment policy is based on the believe that investment results best a arrive by taking a long-term approach and sustainability factors impact the long-term possibility of businesses. the investment team models their financial help for companies out to 40 years. they first began the investment process with building out road maps. this helps the investment team research and dig deeper into sector and global trends. they can dig deeper into countries and sustainability issues. this helps them buy parts of the market they find attractive and helps them to define high-quality businesses and management teams in the sector. the next step in their investment process is building out a focus list. the road maps helps with companies to be added to the focus list and they present these companies at the investment team meetings and they are debated and voted upon
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the focus list right now has over 120 games and it's very little turnover on the focus list. about one or two names are added or deleted each year. all companies on the focus list are covered by analysts and they were in the portfolio. valuation is not a criteria for the focus list at all. a company that fails to meet generations cry ter why for business and management quality and the e.f.g. criteria cannot be considered for the portfolio. even if the valuation is extremely attractive. the last stage of the construction of the portfolio, there are about 50 names in the port phone. generation will then use evaluation to find entry and exit points for these names to be added to the portfolio and removed from the portfolio. they are more tactical around trading than other long-term investors. it has added value to the portfolio. as a result of their proprietary
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research and process and their evaluation discipline and historical returns have been exceptional. they've added 500 basis points of alpha versus the mici world and since inception and they consistently are the top and often in the top depth file. the risk adjustment returns are strong and their up captures north of 100% and their down captures 70% indicating they can preserve capitol in down markets. in conclusion we're recommending an investment of up to $500 million generation global equity strategy. generation is not only a leading global equity manager but a leader in sustainable investing. they will increase the public equity portfolio and we have a lower carbon footprint than the index. it views itself as a partner with their clients. they are a pioneer and leader in e.s.g. investing ex want to be a resource for san francisco going
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forward as we think about this. >> there are two alans up here now. >> later on we'll talk about a manager that flowed through the global equity search. generation was not that. because you are concerned about the environment they approached staff. staff enlisted us to due diligence on the manager which we did. tim our c.i.o. was in london where the firm is head quartered so he personally conducted the diligence and you see our write-up. what i should stress s. our write-up and recommendation to hire them has nothing to do with the s.g. it has everything with the fact that they are a manager with a compelling strategy. the results are quite competitive and we're fully
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supportive of how they approach management of the business and the results they've achieved. i did want to read, and i have researched notes but the analyst opinion that tim wrote was we should build a relationship with generation. the global strategy is closed and there's limited capacity in the asian strategy but they have a compelling story and we should get to know them better. the asian strategy may be interested for the discovery platform, which is a platform of managers that we haven't fully diligence but we find very attractive and intend to do more on. this was the case where a manager approaching you and you asking us to do what we should have done, that is join you in the evaluation, proves to be a good manager not just for you but one we will pursue for others down the road. our notes are there but we're supportive of staff recommendation for all the reasons. they have a compelling strategy, they've been around a long time.
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the results are very competitive over a long period of time. the fact that they do all of that without a carbon footprint is extra icing on the cake but our opinion is fully based on merit alone. >> i just want to emphasize for a moment, alan's comment. this is not an e.s.g. alone investment. in the first three minutes of the first conversation that we had with the formatter vice president, he said it's incumbent upon us to make the case that sustainability invest asking is a superior solution to capitalism, a superior approach to investment management. that has been a guiding principle we see-through the firm throughout. this is not just e.s.t., it's a superior e.s.g. solution and it's a superior investment.
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>> commissioner. >> i want to thank -- could he be in front of us? i also want to thank you for setting up the meetings with generation. i know that we didn't get a lot of attendance but we did get some of it and i thought that they were really valuable meetings. i thought the presentations were excellent. meeting from people generation team. the other thing is we did extensive discussions on this matter at the investment committee where we discussed the e.s.g. and per those reasons, i would like to make a motion to adopt the staff recommendation to hire generation investment manager. >> there's a motion. >> second. >> there is a second. let's have some discussion. i know there's board members who have additional questions. >> commissioner, do you have any
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comments or questions? >> no, i'm just -- >> anyone else on the board? >> no one has questions or comments? >> none. >> none. >> i'm have the path of index. >> that is correct, right. >> yes. >> um, explain to me how, other than the fact they believe in e.s.g., hasn't it all contributed to their returns? that even quantifiable? >> throughout their investment process it helps them to think longer term. a lot of other public equity managers are looking for quarterly earnings and they're not thinking about the longer term sustainability issues. so when they think about the e.s.g. they think will longer term, how can this company be competitive and sustainable and have a competitive edge over the
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long-term and they think about governance, social issues and that is all part of their investment process. i met former vice president al gore he said he doesn't believe in fully divesting he believes that sustainability is an investment opportunity and we need to be a part of that and that is how they build out their portfolio. >> >> i want to talk about it works backwards. >> they kickoff their investment process with building out these road maps. they dig deep into a sector, a country, a sustainability issue and from that they can develop what they think are longer term trends that are attractive. from there they find companies leaders in that industry or that country or that sector and then they build out their focus list.
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>> so not quantifiable? do you want to answer that? i shall it partially is. >> there is some data, i mean, i believe commission i think you've seen the data that goldman sachs is published on various companies and their measurement of various e.s.g. related issues. some of the data is pretty thought provoking and interesting. i think some of it is quantifiable, not every company is as robust in their reporting and certainly when you get outside the united states, and certainly well, i should say when you get outside of the united states and europe and when you get into asia and emerging markets, the data is much more daminimus but that
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also might be why there's strategy in asia could be interesting because if they can unearth that, they would being at the forefront which in asia have more ways to go. i believe that this is partially measurable. >> brian, in our report on page 2, we talk about their investment philosophy and strategy. and they do, against typical managers they look out longer. the i the fact they're in london where it was less about politics and more about environment. companies that waste resources whether it's the environmental resource or human resources or anything else. over the long run will under perform. i think that's true. they tend to emphasis that in their processes. they wait a long time before
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they buy companies, they domain tape i think a longer term focus. quantify each of those factors is hard to do. when you look at the results they're good. with somewhat validate that this approach is a value added approach. >> i think about the question now. yes, we can say the answer is yes. we know that their reduction in their carbon emissions in their strategy is between 70 and 80% and we know that the portfolio is meaningfully out performed. i think the answer we can say to that is yes, it is measurable. the page you have -- >> that is the benchmark they represent. it is a neutral benchmark. one of the thing is interesting is we go down this path with you, is there are bench marks
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that measure not just mark cap weighted all companies but look at mark cap weighted companies that are environmentally responsible. we have to understand that definition. but tracking multiple bench marks may give us more confirmation that companies that practice good environmental practices turnout to be better investments. so, that is something down the road. this particular index is the most broadly used global equity index for international managers. >> is it s that the best index? >> it is, because it is a global index. global universe from which they select stocks but i'm glad you asked the question for another reason. we are funding this from the s&p 500 and this is a global strategy. we are in fact essentially reducing our u.s. equity by maybe 200, 250 million or 1% of
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plan assets increasing our exposure to foreign equities. we think that that's a good trade to make given where valuations are worldwide. >> i have no further questions. is there any other questions or comments from the board? none. we will take this item without objection. do we call for public comment? i'm sorry. >> thank you. >> you are managing a pension fund, not a philanthropy. keep in mind before you make an investment. fiduciary responsibility. just because you want to divest from -- i don't know the way you spell it. anyhow, from energy investments
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like alternative investments, you shouldn't invest in alternative fuels, just because you all. you should invest them if they're a good investment. for the past 10 years, alternative investments have had the same poor performance records as hedge funds, believe it or not. so everybody likes, i should imagine likes chocolate. just because you like chocolate doesn't mean you should invest in the chocolate factory if it's going to go bankrupt or invest in lowry tail. it's your responsibility to invest in investments that are going as a good retain as good as the s&p 500. for past 10 years, most people have lost money in alternative investments than made. 10 people have made money and have lost money in alternative investments than


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