ATTACHMENT D
October 2021 Staff Report
with SRI/ESG Strategies
CITY COUNCIL STAFF REPORT
DATE: OCTOBER 14, 2021 CONSENT CALENDAR
SUBJECT: SOCIALLY RESPONSIBLE INVESTING (SRI ) AND ENVIRONMENTAL, SOCIAL GOVERNANCE INVESTING (ESG).
FROM: Justin Clifton, City Manager
BY: Department of Finance and Treasury
SUMMARY:
The City Council adopted the City Investment Policy on April 8, 2021. At that time, City Council directed staff to incorporate Socially Responsible Investing (SRI) and Environmental, Social, Governance Investing (ESG) language into the FY21- 22 Investment Policy.
SRI and ESG both consider the broader social and environmental implications of an investment.
• SRI values aligned investing primarily uses an exclusionary screening process to align portfolios with investors moral and ethical values.
• ESG values (performance) based investing primarily uses an inclusive evaluation process. This includes factors into the decision process through targeting positive impact.
RECOMMENDATION:
Receive and File.
BACKGROUND:
The City Council adopted the City Investment Policy on April 8, 2021. At that time, City Council directed staff to incorporate Socially Responsible Investing (SRI) and Environmental, Social, Governance Investing (ESG) language into the FY21- 22 Investment Policy.
A growing number of local agencies in California have received requests from their governing board members to invest in “sustainable,” socially conscious,” “green,” or “ethical” investments. This practice is commonly referred to as socially responsible investing (SRI). In addition, the consideration of environmental, social, and governance Item 1E - Page 35
City Council Staff Report
October 14, 2021 -- Page 2
Socially Responsible Investing
(ESG) criteria when investing public funds is becoming more common amoung local agencies in California. The mo re general terms investors now use are: “sustainable investing,” community investing,” “ethical investing,” “green investing,” impact investing,” “mission-related investing,” “responsible investing,” and “values-based investing”.
The City of Santa Monica’s investment policy has a section “Socially Responsible Investing, which the city is directed to invest city funds in “entities that support clean and healthy environments, including following safe and environmentally sound practices,” entities that support equal rights, and “in entities that promote community economic development.”
Socially responsible investment objectives are becoming increasingly popular and may be advocated for by the stakeholders of California local agencies to discourage or encourage corporate business practices or government activities seen as negative or positive under certain environmental, social and governance factors to the public at large.
The City’s current investment policy includes the following:
9.4 Social Responsibility:
The City shall not knowingly make any investments in any institution, company, corporation, subsidiary, or affiliate that practices or supports directly or indirectly through its actions, discrimination on the basis of race, religion, color, creed, national or ethnic origin, age, sex, sexual orientation, or physical disability, as this is not in accordance with the City of Palm Springs policies regarding discrimination.
Investments are encouraged in entities that support community well -being through safe and environmentally sound practices and fair labor practices. Investments are encouraged in entities that support equality of rights regarding race, religion, color, creed, national or ethnic origin, age, sex, sexual orientation, or physical disability.
Investments should be made to the extent reasonable under the circumstances that such socially responsible investments meet minimum permitted requirements by state law, and achieve substantially equivalent safety, liquidity, and yield when compared to similar investments permitted by state law.
Staff will update the FY21-22 Investment Policy to include best practices such as:
Sustainable, Socially Conscious, Green, and Ethical.
Negative S
creening of SRI & ESG Strategies will include prohibiting:
• Tobacco Products
• Fossil Fuel
• Alcohol
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City Council Staff Report
October 14, 2021 -- Page 3
Socially Responsible Investing
• Gun/Weapons Manufacturing and Distribution
Positive S creening of SRI & ESG Strategies will include:
• Entities that support clean and healthy environments
• Entities that promote economic development
• Invest in local community banks with ten or less branches for amounts of $250,000 or less.
• Purchasing Green Bonds
Prior to making investments the City’s Director of Finance/Treasurer’s office will reasonably verify an entity’s support of the socially responsible goals listed above through direct contact or using a third-party resource.
STAFF ANALYSIS:
Staff to include additional language to include SRI , ESG, Sustainable, Socially Conscious, Green, and Ethical in FY 21-22 City Investment Policy.
FISCAL IMPACT:
None
REVIEWED B
Y:
Department Director:
Assistant City Manager:
City Manager:
ATTACHMENTS:
None
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