Thursday, February 22, 2018

Permanent Fund Divestment Campaign Update!

AK CAN! Divestment Campaign partners gave powerful public testimony to the Permanent Fund Board Trustee in Juneau yesterday.

As Kevin Gullufsen reports from the Juneau Empire:

 The request, made at the APFC Board of Trustees meeting was couched in financial terms: “the Fund’s investments in fossil fuels are a bad bet, they say, and Alaskan’s annual PFD checks might be fatter if the Corporation took those investments off the books” 

WE ARE MAKING A DIFFERENCE! 

In response to our powerful testimony on Wednesday, as we understand it, the APFC Board Chair directed the Executive Director as follows: 

“at the next meeting bring the whole board up to speed on fossil fuels” 

Says Rick Steiner, who started this campaign 25 years ago: 

"This is an exceptional, historic statement, for the Chair of the Alaska Permanent Fund to make!  Up to speed, indeed!  The testimony to the Board from our 5 Juneau colleagues was straight talk, persuasive, incontrovertible.  Fossil divestment is a financial decision they must make, and soon. They are losing all of us considerable money by remaining in fossil fuels (as well as toasting the planet) and they now know it.  We are riding a wave, and we will ride it to shore!” 

Some highlights from the testimony: 

I've talked with some investment professionals who believe your assertion that [ “APFC has no way to determine the portfolio’s exposure and performance to fossil fuel holdings as this is not a defined industry category in our investment systems”] is an unsupportable statement.  In fact, it raises the suspicion that managers may know these holdings have lost money and simply don't want to admit it.  In fact, it may be that the Fund is doing the very thing it has told us over 25 years it would never do, and that is make investment decisions for political reasons

Rick Steiner, Oasis Earth  

If we are losing money by remaining invested in fossil fuels, then the Trustees have a fiduciary obligation to divest. However, we support divestment regardless. The longer we support fossil fuels the more expensive climate change impacts on Alaska will become; unique species will go extinct; winter recreation and travel will become more difficult, if not impossible; communities will have to be relocated, culture will be lost; and the list of negative and costly impacts goes on and on (due to technical difficulties Bjørn was unable to testify online but filed via email). 

Bjørn Olson, Alaskans Know Climate Change  

It’s been less than 5 years since the idea of fossil fuel divestment first took hold. This movement has been sweeping around the globe, doubling in size since 2015.  Although the ethical impetus for fossil fuel divestment is to forestall the worst effects of climate disruption, many of institutions are divesting for purely economic reasons, in other words to meet their fiduciary responsibilities.

Elaine Schroeder, 350 Juneau 

The Permanent Fund’s own information shows scores of oil & gas stocks with unrealized losses over an unspecified period. And the losses are not just a US-based problem. As I scanned through the Corporation’s 173-page list of equities, I counted at least 30 other countries with oil & gas cos we’re invested in posting negative values. Even the six oil & gas companies among the top 50 holdings of the Fund show very modest gains, compared with the robust Fund returns in health care, software, semiconductor, food and other companies around the world.

The APFC states that its vision is “…to deliver sustained, compelling investment returns…”  The Corporation’s regulations (15 AAC 137.420) direct that “…all PF investments must be of a quality considered acceptable by other prudent institutional investors, including endowments, foundations, sovereign wealth funds, ….and pension funds.” Further, your regulations state that the Corporation must liquidate, restructure or otherwise bring into compliance a PF investment that ceases to satisfy the prudent investor rule in AS 37.13. 

Gretchen Keiser, Permanent Fund Shareholder 

TAKE IT TO 500! 

Please keep the conversation going by sharing the petition with your friends, family and associates. Many thanks again for supporting Permanent Fund divestment!  United, we WILL create the change we need to responsibly face the rising climate change tide.   

Here are the full transcripts from the 2.21.18 testimony:

Rick Steiner, Earth Oasis

I endorse all previous exceptional in-person testimony from JNU this AM!

1. I commend and congratulate you on your Dec. agreement to hold an Environmental, Social, and Governance (ESG) work session!  After asking for such for 25 years, this is a significant step forward!  You will find that indeed we can maximize Return on Investment (ROI) and make world better place! (in fact, I can't imagine the alternative)

2. As example, the $1 trillion Norway Fund has excluded over 160 companies, including those that make tobacco products, cluster munitions, and nuclear weapons, as well the Norway fund is required:
"to avoid investments which constitute an unacceptable risk that the Fund may contribute to unethical acts or omissions, such as violations of fundamental humanitarian principles, serious violations of human rights, gross corruption or severe environmental damage."

Astonishingly, APFC is invested in most of these companies that Norway has divested (due to these egregious practices), which is truly reprehensible...at very least, APFC should adopt Norway ethical exclusion process!  As well, thpe APFC should adopt a positive investment screen (impact investment) to seek investments in socially positive holdings.   

3. But our Fossil Fuel ask of APFC -- that you assess performance and risk; and divest immediately on financial grounds - remains unanswered.  And this is a solid strategy even outside ethical/ESG considerations....  
At the Dec. meeting, we presented you a petition with over 200 Alaskans. We are convinced that by you remaining in Fossil Fuels, you have lost Alaskans a considerable amount of $ (as our quick analysis of your public oil equities alone shows, in aggregate down 3%).  Many funds are dumping Fossil Fuels (Norway divested coal in 2015, and APFC remains invested in China coal!)

The APFC 12/15 letter to me was very troubling, in its assertion that:

APFC has no way to determine the portfolio’s exposure and performance to fossil fuel holdings as this is not a defined industry category in our investment systems.”  

- I've talked with some investment professionals about that, who said that is unsupportable statement....In fact, it raises the suspicion that managers may know these holdings have lost $, and simply don't want to admit it.  In fact, it may be that the Fund is doing the very thing it has told us over 25 years it would never do, and that is make investment decisions for political reasons:  
Public suspicion is that staying in Fossil Fuels = good politics in AK.

4. In closing, I wanted to ask you respectfully today, for the record, if you are, or are not, considering our FF ask, when you anticipate a decision.  Alaskans deserve to know.

I'd appreciate an answer from one or any of you here for the record. 

Bjorn Olson, Alaskan’s Know Climate Change 

Thank you for hearing my testimony.

My name is Bjørn Olson. I am a lifelong Alaskan, born and raised in Slana, Alaska—a small rural community in Interior. I currently live in Homer. 

Since my teenage years, I have been actively exploring Alaska by human power: mountaineering, backcountry skiing, expedition kayaking and fat-bike expeditions in both summer and winter. My life of adventure in the backcountry of Alaska has opened my eyes to the incredible disruption climate change is having on our beautiful and unique state. 

Two years ago, I developed a climate change education campaign called Alaskans Know Climate Change under the umbrella of the nonprofit Kachemak Bay Conservation Society. We are focused on climate change education, decarbonizing our society, and climate change mitigation. 

Alaska, as you may already know, is warming twice as fast as the rest of the nation and four times faster in winter. In Alaska, you don’t need to be a scientist to know that climate change is real; you only need to spend some time outdoors. However, scientists do understand why climate change and ocean acidification are happening—our civilization is releasing an additional forty billion tons of carbon dioxide into our atmosphere every year and carbon dioxide is a greenhouse gas.

What I, the rest of the board at Alaskans Know Climate Change, and our membership would like to see is a detailed report from the trustees regarding the fund’s fossil fuel investments. Most importantly, though, we would like the Trustees to divest from fossil fuels.
If we are losing money by remaining invested in fossil fuels, then the Trustees have a fiduciary obligation to divest. However, we support divestment regardless. The longer we support fossil fuels the more expensive climate change impacts on Alaska will become; unique species will go extinct; winter recreation and travel will become more difficult, if not impossible; communities will have to be relocated, culture will be lost; and the list of negative and costly impacts goes on and on.

It is time we come together as Alaskans to fight climate change, defend our way of life and embolden the industries of the future. Divesting from fossil fuels is the fastest growing divestment campaign in the world and it is low hanging fruit in the fight against climate change. 

Thank you for allowing me to testify.

Sincerely, 
Bjørn Olson

P.S. Please, if possible, address the technical issue with the call-in option. Most of Alaska is rural and it is difficult if not impossible for people to attend the Trustees meetings in person. It is important that we have the ability to testify, though. Thank you again.


Elaine Schroeder, 350 Juneau 

My name is Elaine Schroeder and I am here representing 350 Juneau—Climate Action for Alaska.  I would like to thank the Board of Trustees for your working to realize the highest investment gains for the benefit of all Alaskan residents.
I and hundreds of Alaskans around the state again request that you provide to the public an accounting of how our fossil fuel investments have performed as well as future projections and risks to these holdings. We urge you to divest from all fossil fuels. I am submitting the divestment petition now signed by over 400 Alaskans. The names of the petitioners are on the Alaska Climate Action Network.

It’s been less than 5 years since the idea of fossil fuel divestment first took hold. This movement has been sweeping around the globe, doubling in size since 2015.  Although the ethical impetus for fossil fuel divestment is to forestall the worst effects of climate disruption, many of institutions are divesting for purely economic reasons, in other words to meet their fiduciary responsibilities. 
Over 830 institutional investors worldwide, with an estimated value of 6 trillion dollars, have made commitments to divest their funds from fossil fuels.  Just the other day Ireland announced its plan to divest from all fossil fuels.  Major cities around the world have divested their pension funds and other equities from fossil fuels including Seattle, New York, Washington, DC, San Francisco as well as Copenhagen, Berlin, Sydney and Paris. 

Numerous foundations including the Rockefeller Brothers Fund (whose wealth was built on oil) have divested. The World Council of Churches and the Lutheran Worldwide Fund and numerous universities such as the Universities of Washington, Oregon, Massachusetts, Maine, Hawaii, California, plus Georgetown, Stanford and Syracuse universities have either fully or partially divested from fossil fuels.  

The World Bank said it would no longer be lending money for oil and gas exploration.

What is perhaps most relevant to the APFC is Norway’s decision to divest their Sovereign Wealth Fund from fossil fuel investments on financial grounds. As a NY Times article stated about Norway’s divestment plans, this is “a sign that even Europe's dominant producer does not have full confidence in oil's future.” 

Thank you.

Gretchen Keiser, Permanent Fund Shareholder 

Good morning. My name is Gretchen Keiser. I’m a Juneau resident and shareholder of the Alaska Permanent Fund.  I am here today to urge you to undertake an assessment of the financial performance of the energy sector investments of the Fund, report the results in a transparent manner, and take appropriate action. 

Since 1976 when the Fund was created, much has happened in the 40+ years with investment market ups and downs.  And many factors continue to pose risks to investing in the global energy market, including:
·      energy price volatility
·      geopolitical challenges
·      fewer capital sources as global banks refuse funding of projects
·      indigenous opposition
·      restrictions on fossil fuel production and use due to air, soil, and water pollution
·      increased energy conservation, and
·      the development of cost-competitive renewable energy for power generation and transportation. 

Over the past decade, the energy sector has performed poorly. Investment resources such as Fidelity, Charles Schwab, S&P, and Bloomberg show minimal or negative returns for oil, gas, energy equipment & services annualized over 5- or 10-yr periods, compared with soaring returns in the broader market. Schwab calls energy one of the two worst-performing sectors in the past 10 years, at a mere 1.2% annualized total return. Fidelity’s performance data shows the energy sector at a negative 13% over the past 5 years, compared with the S&P 500 Index’s positive growth of 77%. 

The Permanent Fund’s own online information from 12/31/17 shows scores of oil & gas stocks with unrealized losses over an unspecified period. And the losses are not just a US-based problem. As I scanned through the Corporation’s 173-page list of equities, I counted at least 30 other countries with oil & gas cos we’re invested in posting negative values. Even the six oil & gas companies among the top 50 holdings of the Fund show very modest gains, compared with the robust Fund returns in health care, software, semiconductor, food and other companies around the world. 

I recognize that the Permanent Fund invests in a diverse portfolio of assets besides just public equities. And I understand that some energy companies pay hefty dividends that are deposited as income in the Earnings Reserve Account each year.  But only your staff and investment advisors have access to information about the other energy-related investments in infrastructure, real estate, corporate bonds, hedge funds or private income. It’s time for you to examine the energy sector performance across all assets of the Permanent Fund.     

The APFC states that its vision is “…to deliver sustained, compelling investment returns…”  The Corporation’s regulations (15 AAC 137.420) direct that “…all PF investments must be of a quality considered acceptable by other prudent institutional investors, including endowments, foundations, sovereign wealth funds, ….and pension funds.” Further, your regulations state that the Corporation must liquidate, restructure or otherwise bring into compliance a PF investment that ceases to satisfy the prudent investor rule in AS 37.13.

I urge the Trustees to direct staff to conduct a thorough performance assessment of the Fund’s energy investments across all assets and report to the public in a timely manner. This is the appropriate, prudent and transparent action.   

Doug Woodby, Permanent Fund Shareholder
Mr. Chairman and members of the Board, my name is Doug Woodby. I am a resident of Juneau and a shareholder with questions about the Fund’s investments.
In my attempt to understand how the Permanent Fund Corporation works, I’ve looked at the corporation’s website and at Alaska Statutes. I have come across the prudent investor rule that you are all familiar with in Title 37, Chapter 13, section 120, which instructs the fund managers to preserve the purchasing power of the fund while maximizing expected total return. I have also seen the highlighted slogan on the home page of the Corporation’s website: 
“INVESTING FOR ALASKA, INVESTING FOR THE LONG RUN” Here are my questions: 
1. As prudent investors, does the corporation keep apprised of the increasing global trend towards carbon pricing, such as carbon taxes and cap and trade systems, that almost surely will make fossil fuel production more costly in the near term as well as the long run? 
2. As prudent investors, does the corporation monitor the accelerating trend of fossil fuel divestments by institutions, local governments, and now countries, actions that will reduce the value of our fossil fuel investments in the near term as well as the long run? 
3. If so, what would be the rationale for not getting ahead of the game and initiating divestment now, to preserve the fund’s purchasing power and to maximize expected return? 
4. Given that the prudent investor rule does not make exceptions for political influence, my last question is why we have such a high investment concentration in the fossil fuel industry, relative to other major funds, and how this can be explained by the corporation’s mandate? 
I look forward to receiving your response to these questions. Thank you. 

 

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