What Fiduciary Duty? San Fran Politicians Try To Force Pension To Dump $470MM Of "Fossil Fuel" Stocks

Tyler Durden's picture

We've frequently argued that public pension underfundings are perhaps the greatest threat to the long-term economic outlook of the United States, if not the globe.  With aggregate underfunding levels of $5-$8 trillion, depending on what discount rate your local politicians decide to pull out of thin air, the forthcoming pension crisis will be too large for even the very generous American taxpayer to cover.

That said, and as if avoiding the next pension-induced global financial crisis weren't hard enough, the San Francisco Board of Supervisors seems hell bent on accelerating the crisis by forcing their public pension board to completely ignore their fiduciary duty to retirees (and all taxpayers, frankly, as we'll all be left holding the bag when these ponzi schemes implode) and immediately dump all "fossil fuel" investments irrespective of financial merit.  You know, because restricting investing options is clearly in the best interest of retirees...even though we would venture to guess that most of them couldn't care less where their money is invested as long as their benefits never get cut.  Here's more fromthe San Francisco Chronicle:

The San Francisco Employee Retirement System is facing mounting pressure to unload its roughly $470 million worth of investments in the fossil fuel industry, which would make it the first major pension fund in the nation to do so.

 

On Tuesday, the Board of Supervisors is expected to pass a resolution urging SFERS officials to consider selling all fossil fuel investments. It’s the second time since 2013 that city lawmakers have asked the governing board of San Francisco’s $23 billion employee pension plan to reconsider the fossil fuel companies.

 

But after what critics say has been four years of procrastination, time may be running out for the board to make an independent decision on the issue. Supervisor Aaron Peskin, who authored the resolution, said if the board doesn’t address the issue soon, he’s prepared to put a ballot measure before voters next year that would compel the the fund to sell its fossil fuel stocks.

 

"The preponderance of evidence is in favor of divestment,” Peskin said. “It’s in their best financial interest and it’s a moral imperative, and they’re dithering on that.”

 

Citing the environmental risks posed by coal mining, oil refining and natural gas extraction, a growing chorus of political and environmental activists has been pushing San Francisco’s retirement system and many other large, public pension funds and endowments to sell off their fossil fuel holdings.

Peskin

Aaron Peskin of the San Francisco Board of Supervisors

Now, admittedly we're not so great at the whole math thing, but maybe is makes some sense to dig yourself out of your current $6 billion funding hole before you go restricting the ways in which your pension board can make money for your city's retirees?

Pension

 

And since it's our favorite pension topic, we'd just point out that that $6 billion underfunding would magically grow to over $9 billion if San Francisco's pension board decided to lower its discount rate by just 1%. 

San Fran

 

Luckily, at least San Fran's pension executive director seems to understand the concept of fiduciary duty...

Selling off a well-performing part of the portfolio, SFERS officials argue, would deal a financial blow that could constitute a breach of their duty to the fund and the pensioners who have paid into it. Last year, SFERS paid out $1.24 billion to over 28,200 retirees and their beneficiaries.

 

“This is a very difficult legal question and discussion that every fiduciary on every public pension plan across the United States is dealing with today,” said Jay Huish, the SFERS executive director, speaking before the supervisors’ Government Audit and Oversight Committee last week. “None of them have been able to come forward and do a complete ban.”

 

Opponents of divestment also say that holding on to fossil fuel stocks allows pension funds to pressure those companies toward more environmentally friendly practices.

 

By divesting, “you lose the opportunity to influence the company or industry you’re investing in,” said Keith Brainard, research director for the National Association of State Retirement Administrators.

Of course, silly things like 'laws' have rarely been effective against liberal politicians intent upon shoving their 'progressive' agenda down your throat. 

“It’s getting to the point where … if you can’t get there and your board can’t get there, it’s going to be incumbent on me and my colleagues to get you there,” Peskin said.

 

“I will certainly be interested in the legal analysis of forcing us to sell at a potential loss without having repercussions on the members of the board as fiduciaries,” Huish replied.

 

“I’ve got some theories,” Peskin said, wryly.

Perhaps SNAP is about to get a new $470 million investor?  That should work out well for city retirees.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
jamesmmu's picture
Ray Dalio: Gold is an Effective Diversifier “The Dollar, It’s a Fiat Paper Currency”, “It cannot be taken for Granted”

http://investmentwatchblog.com/ray-dalio-gold-is-an-effective-diversifie...

jcaz's picture

LOL- San Fran doubling-down on going full-retard......

City_Of_Champyinz's picture

Sounds about right to me, what else did you expect these dipshits to do? Logic's retarded cousin fits well here...

knukles's picture

This is the type of action that ERISA was meant to preclude.
Breach of Fiduciary Responsibility and Duty to the taxpayers, bondholders, etc.
The Pension Fund was not intended as a path of social justice works

Escrava Isaura's picture

Pension plans come with a major flaw: It’s impossible to keep them growing, because we live in a finite planet. Yes, they will all become insolvent even if the interest rates are raised, because it will be a burden usury on the current workers that are barely making.

Well, I guess we could go back to slavery that way the surpluses “profits” will be there for these retirees.

 

auricle's picture

Congress critters know that rates are about to go way lower with the next recession, causing moar oversupply, pushing down oil prices further. Sell why you still can. Pensions now will get to buy the bonds the rest of the world doesn't want. 

 

Oil divestment in the era of the petro dollar. Sounds like currency wars are beginning to pick up. 

YUNOSELL's picture

San Francisco Smug Alert!! -- "Oh, You bought a hybrid? Gooooood For Yooooouuuuuu!! Fart, sniff, ahhhhh"

Shemp 4 Victory's picture

Solyndra for the WIN!!!

 

Oh, wait...

strannick's picture

Pensions have a fiduciary duty to dump oil stocks not because they are polluters, but because the oil stocks, like the pensions themselves, are debt dependent unsustainable ponzies. And on that basis, pensions should be dumping USTreasuries as well.

Son of Loki's picture

But do they have the "moral authority" to order them?

That's a favorite Far Left cliche.

Escrava Isaura's picture

Yes. You’re correct. Commodities will crash. And even worse than 08.

However, pensions still need to collect rent.

Forever.

See the “forever rent flaw” problem?

 

Too soon for the collapse of the petrodollar. Plus it will lead to WW. China and Russia will figure out a compromise or otherwise they will have a war on their borders.

 

strannick's picture

War on their borders? Kind of like they have (Ukraine, North Korea, South China Sea) now? And will have forever? I dont think there is any compromise with the Deep State Satanists. Fight or submit. 

overbet's picture

MCD or any pharma does more damage. Next up cant buy gun stocks, alcohol or tobacco, forget about buying FICO, credit scores are just too racist. Tech stocks only apparently. Liberals are so fucking stupid.

Hopeless for Change's picture

These Leftards must be stopped.

Consuelo's picture

 

 

No worries...   Irma, Harvey, Jose, wildfires in the West, etc.   Beezlebub is saving his best for the Glory-Hole capital of the world, trust me.

spastic_colon's picture

wonder how much musk paid them to do this??

Five Star's picture

Every state's pension underfunding with realistic market values by taxes revenues:

 

http://thesoundingline.com/accounting-for-reality-pension-funds-are-in-b...

Son of Loki's picture

Wars, nank bailouts, auto bailouts, student loan bailouts, Harvey, irma and so on....will require trillions more to be printed just o keep the GDP where it is. I doubt we'll see much growth any time soon given the above as well as the dangerous divisiveness the lefties/Obama/Soros/DNC/BLM  have created.

 

However, I do suspect PMs will respond and rise but who knows how much and when.

buzzsaw99's picture

please do, and buy tesla common with the proceeds.

Village-idiot's picture

Just before the share value collapses, down to what they're really worth.

Megaton Jim's picture

Hell, go long on Lottery tickets!

Stormtrooper's picture

Many of us will no longer be "taxpaying" if the criminals in D.C. try to force us to pay for the stupidity of all of these politicians unless they are willing to round them up and line them up against a wall for us to have our way with.

loves the truth's picture

Democratic Party is communism which is Zionist Judaism which is globalism which is genocide!!!!

gregga777's picture

If you make him mad he'll go kill some more Palestinians, steal their land on the West Bank and build more illegal settlements.

loves the truth's picture

By the way, oil does Not come from fossils!
It's a scam to make you believe oil is very limited

torabora's picture

If they are honest they will kill themselves since they benefit from fossil fuels. Hopeing

gregga777's picture

"The San Francisco Employee Retirement System is facing mounting pressure to unload its roughly $470 million worth of investments in the fossil fuel industry…"

Once again, the American Intellectual Yet Idiot classes ruling MORONS are going to try to tell the American People, "Do as I say, not as I do." Does anyone believe that these hypocritical POS's will actually stop their own use of so-called 'fossil fuels'? Are they going to give up their Mercedes Benz limousines, heated pools, huge whirlpool spas, 10,000 square foot mansions, private jet flights to their luxury 'cabins' in Jackson Hole, etc.? Of course not. These hypocrites NEVER suffer the consequences of their actions or political policy failures. They are all despicable and worthless scum.

I hate cunton's picture

Fags get AIDS because of their sick acts.  They deserve it.

I hate cunton's picture

Some sicko fag sticks his doink into another fags poo chute and then dies and we're supposed to ignore what he did and think he's cute and feel sorry for him.  Well not me.

Village-idiot's picture

Notice, they're called "innocent victims"?

What laugh!!

The real innocent victims are those who have to pay for it, in increased taxes.

Consuelo's picture

 

 

"The preponderance of evidence is in favor of divestment,” Peskin said. “It’s in their best financial interest and it’s a moral imperative, and they’re dithering on that.”

 

'Moral imperative'...  

'Peskin'...

Always and forever, when it comes to the moralizing perversions, you can count on a 'Peskin-owitz' to be right there at the ready...

 

 

 

DeaconPews's picture

Liberalism is a mental disease.

lolygager's picture

A wise man would make it illegal for a government employee pension to guarantee benefits of dollar amount or a %of past wages amount. Make the guarantee as a % of assets held in the pension fund.

 

Hurricane Baby's picture

How about just abolish public pensions for being Ponzi schemes, pay the workers that money up front, and let them decide how to arrange their retirements.

CRM114's picture

Because there aren't the funds to do that. All public funds rely on current contributions to pay current dues. There aren't the funds anywhere in the nation to pay all the nominal funds in one lump at any one time.

tion's picture

A wise man would make it illegal for a government employee pension paid for by taxpayers who don't even get such a benefit to even exist, full stop. They are to be as servants to the taxpayers, not the other way around.

Village-idiot's picture

The sooner California separates from the USA, the better (for the USA).

south40_dreams's picture

Give it all to Elon Musk, your star citizen

Jam's picture

He should divest part of his nose.

Consuelo's picture

 

 

This is the type of typical silly Bay Area Shit that takes place when these useless eaters think we have entered some new reality where $ad-revenue paves the way of the future, and 'backwards' pursuits like drilling, mining, extracting, etc., have no utility.    

 

Village-idiot's picture

Anyone in California with any get-up-and-go, should get up and go.

If you have a business that can be run somewhere else, get out.

Someone's gonna have to pay; let the progressives, who voted for these fools, pay.

Get out of that idiotic state now, before you end up paying for all this nonsense through payroll taxes, business taxes, extra fees, etc..

south40_dreams's picture

Yes, it's time for all sane people to abandon ship

CRM114's picture

Speaking as a sailor, it's time to mutiny, take the ship, and throw the other f#ckers off it.

Ben A Drill's picture

Take the Burden off of the States and let the government employees invest in a 401k plan with no promises like the rest of us.

CRM114's picture

Can't be done. There isn't the money to allow transfers. 

The UK has banned transfers out of unfunded public sector pensions for this reason - they did that 2 years ago.

serotonindumptruck's picture

So they're being forced to liquidate their position at a loss?

If this expedites the collapse of the USD, then so be it.

OCnStiggs's picture

Those pension plans are going belly up.

So they want them to go belly up faster?

Whatever you want!

Village-idiot's picture

I'm surprised they haven't gone "all-in" on cannabis stocks!

If When California legalizes cannabis for recreational use I'm sure things will improve.

Or, when the whole system is collapsing around them, they won't give a sh!t.

abgary1's picture

Man-made climate change is a total fraud (read Dr. Tim Ball) and electric vehicles are expensive piles of shit that only exist because of subsidies.

The use of fossil fuels is not about to end anytime soon.

We can only hope the board is able to do it's fudiciary duty.

Socialism does not work and Venezuela is a modern day example of how dangerous it is.