Decision for the Board Just Became Easier – Divesting Means More Costs for the City of San Francisco and No Reward

The San Francisco Employees’ Retirement System (SFERS) Board has an upcoming decision to make that will affect the lives of thousands of Californians. However, this decision just became a very easy one. A recent study from Compass Lexecon found that divesting from oil, natural gas, and coal securities would cost SFERS $11.5 million annually, the authors note in a recent San Francisco Examiner column. That equals to $149 billion loss over 50 years.

The study also found that the decision to divest not only equates to pension losses – but also creates additional costs for California. Selling fossil fuel stocks and buying replacement stocks results in transaction costs including fees, commissions, and compliance costs. These also reduce returns of the funds, making Divestment all the more costly.

The authors of the study claim:

“As a result of these additional costs, total losses due to divestment are likely to be even higher than reported in our study.”

Divestment is both a costly and ineffective measure.

The decision to divest only harms the workers who have dedicated their lives to building up pensions – not the energy companies. Further, there is no evidence that divestment has an impact on the companies targeted, and therefore, no evidence the decision to divest has an environmental benefit.

Most recently, the Seattle City Employees’ Retirement System Board voted to reject to the measure to divest their city workers pension funds from energy holdings. Their reasoning was simple, there was not economic justification and there would be no impact on the company.

Seattle’s recent decision should be taken into consideration when the San Francisco Employees’ Retirement System Board takes the issue to a vote next month. Not only should San Francisco examine that decision, but the Board should follow in the footsteps of a progressive city like Seattle.

Coupled with the fact there is statistical evidence showing divestment is a costly decision, has no impact on neither private companies nor the environment, and one of the most progressive cities in the nation has already rejected the measure to divest, the San Francisco Employees’ Retirement System Board really does not have a difficult decision to make at all.

 

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