Dear Mayor Taylor and Menlo Park City Councilmembers,
As you renew your investment policy for the fiscal year of 2024-2025, I urge you to consider improving your policy to prevent any future investments in fossil fuels. Fossil fuel companies continue to perpetuate the climate crisis and prevent the needed transition to renewable energy sources. Taking this action would follow in the footsteps of nearby cities San Mateo, Palo Alto, and San Mateo County’s investment policies.
Last April, San Mateo city council voted to approve updating their investment policy Section VIII - Prohibited Investments Vehicles and Practices to prohibit investments in entities that receive a significant portion of their revenues from tobacco products, fossil fuels, firearms, or weapons not used in our nation’s defense. Please see the Appendix to view this policy in San Mateo’s 2023-2024 investment policy.
In recent years, Palo Alto has added ESG (Environmental and Social Governance) responsibilities to their investment policy. This added section of their investment policy states that direct investments in entities that manufacture tobacco products, firearms, and engage in direct production or drilling of fossil fuels are discouraged. Please see the Appendix to view Palo Alto’s 2023-2024 investment policy.
Lastly, in 2023, after advocacy from the San Mateo County Board of Supervisors to the San Mateo County Treasury, the county added a Socially Responsible Investment (SRI) policy to their 2023-2024 investment policy. This added section of the 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, including with respect to safety of principal, liquidity, and return on invested funds. Please see the Appendix to view the county’s 2023-2024 investment policy.
Menlo Park currently does not hold any corporate bonds invested in fossil fuel companies, so adopting a policy similar to that of San Mateo, Palo Alto, or the County would not immediately affect any Menlo Park’s investments. However, it will prevent any future investments in fossil fuels, and the benefits of this action are twofold:
1. Fossil fuels are becoming increasingly risky and speculative. The state of New York hired Blackrock, one of the world’s leading financial and asset managers, to determine if stopping investments in fossil fuels was financially responsible. Blackrock found that it was indeed financially responsible due to the historical underperformance of fossil fuel-backed securities.
2. Fossil fuel companies continue to spread disinformation and pour money into politics to block strong climate policy from being passed in the US. Saying no to fossil fuels is a social statement that Menlo Park does not stand behind these actions. Due to the action already taken by other local cities, this will have an even stronger message.
Menlo Park has led the way in climate action on the peninsula, and by prohibiting fossil fuel investments, the city can ensure its financial strategies reflect its environmental commitment.
Thank you for your consideration,
Anjuli Mishra on behalf of San Mateo County Youth Climate Action
Appendix
City of San Mateo
San Mateo Investment Policy (Page 7)
Section VIII - Prohibited Investments Vehicles and Practices
State law notwithstanding, any investments not specifically described herein are prohibited, including, but not limited to futures and options. In accordance with Government Code, Section 53601.6, investment in inverse floaters, range notes, or mortgage derived interest-only strips is prohibited. Investment in any security that could result in a zero interest accrual if held to maturity is prohibited. Under a provision sunsetting on January 1, 2026, securities backed by the U.S. Government that could result in a zero- or negative-interest accrual if held to maturity are permitted. Trading securities for the sole purpose of speculating on the future direction of interest rates is prohibited. Purchasing or selling securities on margin is prohibited. The use of reverse repurchase agreements, securities lending or any other form of borrowing or leverage is prohibited. The purchase of foreign currency denominated securities is prohibited. Local governments that are not Qualified Institutional Buyers (QIB) as defined by the Securities and Exchange Commission are prohibited from purchasing Private Placement Securities. The SEC defines a QIB as having at least $100,000,000 in securities owned and invested. The purchase of a security with a forward settlement date exceeding 45 days from the time of the investment is prohibited.
In the event all general objectives mandated by state law and set forth in Section III above are met and created equal, investments in corporate securities and depository institutions will be evaluated for social and environmental concerns. Investments are prohibited in entities that receive a significant portion of their revenues from the manufacture of tobacco products, fossil fuels, firearms, or weapons not used in our national defense.
City of Palo Alto
Palo Alto Investment Strategy (Page 3)
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) RESPONSIBILITIES
In addition to and subordinate to the Safety, Liquidity, and Yield investment objectives, Fiscal Year 2023 investments that support sound environmental, social and governance (ESG) objectives are also considered. While the City’s portfolio is not classified as an ESG portfolio, investments in entities that support community well-being through practices that emphasize safe and environmentally sound objectives; fair labor practices; and equality of rights regardless of sex, race, age, disability, or sexual orientation, is encouraged. Direct investments in entities that
manufacture tobacco products, firearms, and engage in direct production or drilling of fossil fuels is discouraged. This section applies to new investments (after November 5, 2018) only and does not require divestment of existing investments. Investments in Certificates of Deposit (CDs) and Negotiable Certificates of Deposit are exempt from the ESG investing objective.
County of San Mateo
Investment Strategy 2024 (Page 6)
V. D. Socially Responsible Investment Objectives
In addition to and while complying with California Government Code provisions that regulate the investment of public funds (which require that, when managing and investing public funds, the objectives shall be, primarily, to safeguard principal of invested funds; secondarily, to meet the liquidity needs of the local government; and third, to achieve a return on invested funds), the County Treasurer recognizes the importance of socially responsible investing. The Treasurer will consider and promote investment in authorized issuers that display adherence to strong environmental, social and governance (ESG) principles, including but not limited to, environmental sustainability, social and economic justice, and good corporate governance. The Treasurer will forego investments in fossil fuel issuers if able to do so while complying with all legal and fiduciary mandates, including with respect to safety of principal, liquidity, and return on invested funds. The Treasurer will seek to invest in a socially responsible manner by considering investments in corporate issuers that meet designated risk score thresholds, as provided by an independent organization or organizations that supply analytical research, ratings, and data to institutional investors regarding issuers’ environmental, social and governance (ESG) practices. Issuers will be reviewed and confirmed against these thresholds on a periodic basis, and any investments in issuers that fall below designated thresholds may be sold or held to maturity.
