We will notify people in advance before that comes back on the calendar. Now we will start before Public Session we will have the roll call. roll call . We have a quorum. The rules for general Public Participation will be in effect. If you want to speak, please submit your name but limit to two minutes when we get to times to speak on items in general or a particular item when called. We will go to closed session. Do we have a motion from the board . Motion. Second. All in favor say aye. Motion passes. Lets figure out how to operate the fans with the doo [closed session]. We need a motion regarding closed session to report out to disclose or not disclose. Is there a motion to that effect. I would move. Motion that is seconded. All those in favor say aye. We will start with general Public Comment. We will give is kim still here . Thank you. San francisco Labor Council. I am honored to be here today, and the San FranciscoLabor Council this past year and a half two years has under gone leadership changes. I am here to introduce myself and on behalf of the executive director introduce him. We plan to work with each and every one of you over the next few months through the Public Employee committee and talking to you about how the retirement system can reflect the current values of labor here in the city. Thank you. John, go ahead. I am john. I am a 44 year member of the pension fund. I have got some good news for you Board Members today, believe it or not. Last friday the elk Care Trust Fund decided to invest in hedge funds. 400 million with the big boys investment club. I guess he was talking about you members. She said have said the big persons investment club. I gave that board five reasons why they should not invest in hedge funds. I got the impression they decided to invest in hedge funds before the Public Comment. The five reasons i gave them not to invest in hedge funds are the same five reasons i will give you to divest. Hedge funds are poorperforming, high risk, high cost investments. Second reason. 30 Large Pension Funds like the calpers and new york city are divesting. Third reason they do not give down market protection. 2008 was one of the largest down markets in history. Hedge funds lost 18 to 20 . Those less risky had a loss of 21 . Fourth reason. What is supposed to be the best invested in the world advised our pension fund two years ago index funds would be a better investment than hedge funds. So far that is right. Fifth reason and most important. The vast majority of our members dont want their money in high risk hedge funds. I guess that is all i have to say. Please use common sense and divest from hedge funds starting today. Thank you. Good afternoon, commissioners. Representing retired employee of the city and county. What i noticed in the packet was this letter inviting commissioner bridges to this government of chili in the Second Investment Forum in chili in november. It is a great honor to have a member of our board to be invited to this event. It is an apex summit. There is a lot of stuff in here. I was blown away. It is a great, great honor, and we should congratulate commissioner bridges to be so honored to attend and represent us at this great event. Congratulations. I want to make a Public Service announcement. To my fellow commissioners. They cant answer back because of Public Comment. I am the new chairman. As the new chairman of the Investment Committee, i would like to encourage my fellow commissioners to attend the Investment Committee next week. We have a series of interviews for investment managers. I do not and the president knows me as the commissioner running a show, but i dont like to tell people that have come in to present with doing business and tell them we dont have a quorum. I would encourage everybody to attend or if not give notice as soon as possible. Thank you. Let me emphasize that. Please understand, if it is not obvious. Interviewing two terms to be our general consultant which is one of the boards key roles for driving all our investments, if we do not have a quorum that decision is frozen for who knows how many months. Please, your attendance is required if we want to do one of our very important decisions. This is good cop and bad cop there. Do you want to speak on item 12 . Item 13 is pulled for today and for the foreseeable future. You have the floor, mr. Coker. Are we on item 7 . Item 5. Approval of the minutes of the september 11, 2019 meeting. Move to approve. Second. Any amendments. Public comment on item 5. Seeing none, all in favor say aye. Opposed. Item 6. Item 6. Consent calendar. Does anybody want any items on the consent calendar set aside for separate consideration. That does not require a second. A motion is in order. I move to approve. Second. Motion made and seconded. Any Public Comment . All in favor say aye. Okay. 7 investment calendar. Annual esg update. In june of last year we were presented the Strategic Plan and then we hired Andrew Collins of the director of esg investing. He has 12 plus Years Experience at state street Global Advisers where he was the esg strategist and at the standards board where he was the Technical Research director. Andrew also holds a bachelors degree from Jail University in environ yale university. He is akafst credential holder. In february of this year we also hired luke angus. Luke has 10 years investment experience. He is also a cfa charter holder, with a bachelors degree in finance and is in the latterpinings in a degree and master degree in Renewable Energy and sustainability systems. Todays update is an update on our three pillars of the strategy. Those are active ownership, investment management, and esg collaboration and communication. There is an extensive amount of information in each of those three umbrellas. I want to recognize andrew that the framework that he introduced to the board last year analyzing risk factors has been recognized by peers throughout the country. Andrew and luke have also been very helpful and informative and collaborative in bringing the investment recommendations since their hire to the board. With that i will turn it over to andrew. Thank you, bill, for that introduction. Good afternoon, commissioners. I will pull up some slides here. I am here to do what will become an annual update on the esg platform. There is a fair amount to cover. Quickly i will outline all of materials we are going through today. I believe each of the voting items will be called separately. I will outline what those are so we have a full picture what we are talking about. First, i will throw in an overview of the esg platform initially presented last june to the Investment Committee. Refresh everybody on those three pillars of that platform and provide updates what we have done over the last year or so. Next i will provide updates to investment restrictions starting with tobacco, then sudan, then firearms and thermal coal. I will wrap up the discussion talks about how we are addressing climate risk across the plan. This including investment restriction in certain oil and Gas Companies and a new analysis we have done of climate risk in the utility sector. If that sounds good, i will start with the esg program update. As we have discussed last june, i am putting this back up on the screen. This esg platform provides a structured way to integrate environmental and social and governing factors that we consider as we invest the plan. We are focusing on esg factors material to longterm Investment Performance and not focusing on any factors that are a concession or promote a social or political agenda. Our issue platform is three pillars. Pillar one is active ownership. Active shareholders. We are engaging with companies in the portfolio around esg topics material to the operation of those companies. This is primarily public equity issuers and in certain cases those companies that issue public debt. In addition, as active owners we are voting all shareholder proxies with direct ownership in companies and doing this consistent with the esg beliefs and proxy voting policy. Pillar two relates to the way we incorporate esg into the manager Due Diligence an selection and monitoring. We are not only trying to mitigate the risks in potential investments but using esg as a lens to identify new opportunities. Pillar theory lates to collaboration and communication on the important esg issues we are looking at. That is collabberating with other investments and communicating with our full range of stakeholders interested in how the plan is addressing esg considerations. I will provide an update on each of the three pillars in terms of activities we have done over the last year or so. Starting with one. Active ownership. We have made progress in building out an active Ownership Program in 2018 and 2019. On proxy voting we made the switch from isf to glass lewis. New proxy research provider. We are excited to hear about the quality of research they provide, and on all of the Shareholder Resolutions that we vote and enhanced reporting capabilitities we have as part of that platform. We made updates to the proxy voting guidelines this year to strengthen voting in a few key areas. Director diversity, dual class share structures and executive compensation practices. We voted on 1500 meetings so far in 2019, and i think a few comments on the proxy voting season this year. We have noticed a significant be decrease in shareholder proposals on environmental and social projects. An uptick in those withdrawn by the proponent who filed them. The reason they are withdrawn the management of companies have agreed to address the issues in the shareholder proposal. These are not showing up in the voting statistics. Management of company is largely being more responsive to shareholders around environmental and social issues and working to address those without letting those come to vote. On those that did vote, we supported several key proposals on climate risk management, gender pay disparities, enhanced reporting and the adoption of Board Diversity policies. We used votes to indicate kernels around the management of climate risk. We voted, for example, against three directors reelection amount exon including the c. E. O. Woods for failing to adequately address Climate Change and voted on a chartered Board Committee at exon for environmental and social issues. That is one example. In february of next year we will provide a comprehensive report on the 2019 proxy voting activities once the year ends. Moving to engagement. This year marked the start of a program to more directly engage with companies on esg topics. We contacted about 50 through letter writing and emails and ended up having in person or over the phone conversations with about a Dozen Companies on material esg issues for those companies. We focused on thermal comb companies around the plan to ex it the comb industry. We met with oil and Gas Companies to discuss climate risk and the energy transition, and we took the lead on three companies lacking women on the board of directors and encouraged them to take steps to increase the boards diversity. Then we contacted gun retailers to press them to dont more and safer responsible practices around the retail of firearms. Lastly, in the active ownership pillar. We engage order the regulatory and policy front. We lent our voice for several initiatives like investor and task force on climate related financial disclosures. Quick overview of the three pillars, working all of these areas is ongoing and will continue that through the rest of this year to 2020. Likewise, we have spent a good deal of time focusing on pillar two integrating esg throughout the management process. As we approach manager Due Diligence and make recommendations to invest, as we monitor our managers performance over time we are trying to understand two important things how they consider e sg factors. One is how they inform and and e in the Investment Strategy they were considering investing in. Two, how does the manager think about the social and governance factors in the way they are running their own firm or company. Under both questions is the belief esg consideration can and should be added to the full scope of our managers process for investing our capital. We tried to be conscious in working with investment teams. It is not a one size fits all approach. We dont have a bright line requirements about what we are expecting around the esg practices, but really we tried to work with each of our investment teams across the public and private markets to design a set of questions in a process that is getting at the most material esg questions relevant to that asset class for investing and informative of the end decision to make an investment recommendation or not. Ultimately a lot of this process is qualitative, it involves asking questions of managers, filling out questionnaires, reviewing their materials with our professional judgment. A lot of it ends up being what managers say about themselves or the investment process. The other thing we tried to do here is really to see if we can access, utilize data to validate if and how managers are actually doing what they are saying in terms of incorporating esg backers to the investment process. We are doing this at the individual strategy level but also at the asset class level and exploring ways at the full plan level. One of the things we have done recently is licensed a data set from msgi research. They are one of the premier providers in the world. We are be beginning to get comprehensive ratings for the Public Market funds right now but over time we hope to identify similar data sets for the entire portfolio. One of the things we are trying to do with the data is integrate it with the existing system to measure risk and monitor performance. These are the Style Research and we are trying to do this so we can look at esg factors alongside financial factors and not in a separate or siloed kind of way. We have licensed Carbon Emissions data for a ca Carbon Footprint. As of june 30 this year the last time we ran the data, the public equity portfolio had a weighted average carbon intensity, which is the most relevant metric, that was 22 lower than the policy benchmark. The chart on the left shows this breakdown by sector and how that emissions reduction is allocated and attributed to the sector allocations and stock selection. As you can see in the final two rows, a lot of the reduced Carbon Footprint is due to the portfolio being underway in the material sector as well as energy sector, which are the three most carbon intensive sectors in the economy. Over the last 10 years if we look back further, the public equity portfolio, the Carbon Footprint declined 40 over the last 10 years versus 35 of the benchmark. We are out pacing in terms of the Carbon Footprint reduction. In the past year we can see the billion dollars in low carbon strategies in the public equity port folio was effective in lowering the public equity carbon foot print by about 7 . The full details of the analysis are in a separate memo attached to the item. I wanted to highlight theketta aways here the keys here. We are continuing to do this thirdparty data to assess climate risk and other factors. We will talk about the climate risk piece in a little bit, but we are continuing to evaluate new ways to do this, measure the impact of our investments both in esg perspective as well as financial perspective. The other thing we have tried to do in terms of our analysis is look at the way that our investment restrictions and restricting investment in certain sectors and Certain Companies has affected the performance of the plan from a return perspective over the last 20 years when we first put in place the investment restriction for tobacco. When we first added our investment restriction in 1998, this was restricted investment in u. S. Tobacco firms. We have estimated that over time as we added additional restrictions to our portfolio, we have had a net negative impact of 64 million. The assumption here is that if we invested in a index portfolio of the policy benchmarks versus policy benchmark that excluded the securities in each of these restricted areas, this is what the cumulative impact would have been over time. I think you can see here from the chart on the left our investments in tobacco has had the largest impact. That impact fluctuated over time to be both positive and negative but an aggregate basis is negative. The investment restrictions then on an aggregate basis since 2006 have been positive by about 25 million and the other exclusions in place for a period of one to three years have been pretty legally gibel. It is in another member mo. We will another memo. We will conduct this each year and report back any new findin findings. To wrap up here with pillar three of the platform, which is really about esg collaboration and communication. Much of the work we are doing here is aligned with the work that other investors in the country and around the world are doing, and we conduct a lot of our active ownership work in collaboration with other investors. This is superimportant as a way for spurs to im fiour voice and the impact we are creating with public companies, a collective voice is much stron