S.F. pension board takes step toward ditching fossil fuel funds

The San Francisco Employees’ Retirement System board took an important step Wednesday toward divesting the more than $540 million it holds in fossil fuel companies and moving the money to environmentally friendly funds.

The board voted Wednesday to go to “level-two engagement,” meaning it will actively attempt to influence the policies of the companies in which it invests. The next step would be to move forward with divesting from the companies.

“If you want to divest, you have to start somewhere,” commission President Victor Makras said. “Our mere size and name brings something to the engagement process.”

Some universities and private retirement funds have divested from companies with poor environmental or labor track records. If the San Francisco retirement board ultimately takes that step, which is still likely at least a year away, it would become the first city to refuse to invest in funds that include fossil fuel stocks.

“There is some urgency,” Supervisor John Avalos, who has led the charge, told the board. “We have to take into consideration the real (climate) changes that are happening overnight.”

The counterargument is that stocks of fossil fuel companies are a component of most major index funds, and divesting from them could limit pension-fund revenues that pay for the retirement benefits of thousands of city workers.

“I don’t think I’m in a position to do that,” said Commissioner Brian Stansbury, the only one of seven board members to vote against moving to level two. Stansbury, a San Francisco police officer, expressed concern that moving the money out of fossil fuel assets would be “financially risky.”

The pension fund has previously divested from Sudanese firms and tobacco companies.

The $541 million the board has invested in indexes that include fossil fuel companies accounts for 3.4 percent of the nearly $16 billion the board invests in public funds. Members of the retirement board emphasized Wednesday that any final decision to divest would come after extensive analysis.

Some of the commissioners, however, expressed frustration that the process was taking so long.

“It seems like we are taking much longer each time we address this,” said Commissioner Leona Bridges.

Brett Fleishman, a senior analyst with the environmental group 350.org, urged the board to set a timeline for making a final decision.

“Please set diligent goals and an expeditious timeline,” Fleishman said. “The issue is immense, and the clock is running out.”

Emily Green is a San Francisco Chronicle staff writer. E-mail: egreen@sfchronicle.com Twitter: @emilytgreen