In a 4-1 vote earlier this month, the San Mateo County Board of Supervisors approved a revised Investment Policy Statement presented by Treasurer Sandy Arnott that expressly “recognizes the importance of socially responsible investing.”

The revision comes as a result of a January board meeting at which the supervisors discussed an earlier version of the policy statement. Supervisor David Canepa raised concerns about investing in fossil fuels when the county had sued the same companies for damages caused by climate change. At that meeting the supervisors asked Arnott to present a revised policy within six months.

Following the January meeting, Canepa tweeted, “It is wrong that San Mateo County continues to invest in fossil fuels when we are suing Big Oil for the damages it has inflicted on us through sea level rise.”

Canepa voted against the revised policy and again voiced his objection that the county’s portfolio continues to maintain holdings in fossil fuel companies. Although less than 1 percent of the roughly $7 billion portfolio is invested in Exxon and Chevron, supporters of divestment contend that it is important for the county to end these investments immediately.

Kenneth Shiebel, who advises Arnott on investments, replied to Canepa’s concerns by stating that the county had reduced holdings in fossil fuel companies to $14.3 million and would not purchase such investments in the future, “unless there are no other alternatives.”

Supervisor Dave Pine pointed out that the revised policy states that, “the treasurer will forego investments in fossil fuel issuers if able to do so, while complying with all legal and fiduciary mandates.”

County attorney John Nibbelin added that despite similar actions taken by other counties he believes immediate divestment could violate rules governing such public investments. These rules require the treasurer to prioritize financial returns.

During public comments Cynthia Kaufman said that the Pacifica Climate Committee prefers Canepa’s position because it is stronger and clearer, but acknowledged that the new policy is helpful and will serve as precedent.

The revised policy presented by Arnott goes beyond fossil fuel companies and states that the treasurer will consider investing in “authorized issuers that display adherence to strong environmental, social and governance (ESG) principles.” ESG guidelines have become a popular guide for investors, but do not always result in the best financial outcomes. In a recent article in the Harvard Business Review, University of Colorado finance Professor Sanjai Bhagat wrote that ESG funds “perform poorly in financial terms.” 

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