Questions on anything we discussed. Any questions . I have a comment. Very impressive. As you know when i was appointed, i was asked a lot of questions about esg by the board of supervisors and the like. I did what i thought was great Due Diligence but i had talked to bill earlier about this, and i wish i had known it wasnt as gloomy as i thought. They have taken an active step forward and andrea is coming on board with your associate. More importantly, the numbers against the benchmarking. I never get the acronyms right. They are proving out it is going in the right direction in terms of our exposure. I commend you on that and hopefully we can bring the light of day on these numbers to the public. Have you shared this with anybody assigned from the Board Members . Folks at city hall who raised these questions in the past . I met with certain beneficiaries, plan members, sort of informally, but no formal presentation to city hall. We have not provided an update since the last time we had conversations with folks apartment city hall. We had discussions with the mayors environment liasson. He traveled to a couple conferences. He sat where the people around the table commended San Francisco for the steps and how they are leading the way in many aspects. Whether the message is getting to to Mayors Office i am not sure. We believe we were contacted by mr. Jeu and he represented the Mayors Office of environment. He invited andrew as a guest of the mayor to attends a conference that otherwise we would not have been invited to. The Mayors Office is aware. Whether they had this comprehensive report, i do you want it. The materials are through early liasson on the environment. I suggest an update for other members of the board who are working on this issue. They will have seen it as radio silence from the time they brought in up. It might be good to show what is done before it becomes another issue. I have given a very informal update on these numbers to the Mayors Office that i was asked about. It is very informal. My concern is the board. I dont think they have been brought along. I echo that and maybe shipping the reports to them. The update part of it, you are right. It comes up generally in a budget committee. We would like to prevent it not coming up in the budget committee. Thank you, andrew, for the update. I have been following this closely and attended a lot of meetings with you. I would say the progress we made has been remarkable. Thank you very much to you and your team. I concur with the comments made by commissioner chu that is where the feedback will come from. Have you received mid feedback with the piece with exon and others. I know that was a big issue with the fortune 500 companies. Exon was a big standout. Familiar Institutional Investors voted the way we voted on this issue. Is there any follow up . There has been. I think the company is now making an effort to engage with investors, but no specific update in terms of an outcome to report. The other issue i know is big at cii was the executive and board representation. I am glad you joined in that the way we voted on those. For Institutional Investors this is a major issue moving forward as you know from c i i. I really appreciate the fact we joined with othertutional investors. I am looking forward to more. I knew about the pri. I am glad we are on that as well. I would like to hear more on the other piece. We will update that item when we talk about our firearms report. Perfect. Thank you. On your page 6, it goes to the middle platform. The esg investment management. Not the one on the screen right now. It will go esg investment management. On the screen before that there is a bullet integrating it to investment process across asset classes. I know we see your memos attached in investment recommendation. Those are Investment Decisions to make you through on the positive side. The question says for this work there has to be in the process like risk management. It is esg screen which is very broad. Has it resulting in stopping staff from pursuing any represent relationship or recommendations. It is certainly something we can document more comprehensivelyinmoremormore cod social considerations that we integrate and have stopped investments to make a recommendation or come to my desk. We havent done a comprehensive process to catalog that. There is so much to keep track of. The table with the performance numbers, plus and , when it is a summary it hides other work. That is why i asked. If it helps staff screen out other compliant managers, it is another way to prove those urging us to do that why the system is producing. You dont see it in the numbers. No further questions i will call for Public Comment. You Board Members that want to go to the front door to invest in firearms or tobacco or fossil fuels, you dont seem to have a problem in the backdoor in investing in hedge funds. Hedge funds will invest in anything it can make a quick profit in, even if that is investing in fossil fuels, firearms and tobacco so if you want to leaveiate that problem, all you have to do is divest from the hedge funds starting today. Thank you. Thank you very much. Commissioner driscoll and retirement board it is a long time. I am jed the regional climb see Organization Climate organization. In 2013 we started coming to your meeting. The City Residents concerned about Climate Change. I can see why your esg work is around the country. Iowa business to thank your staff from everyone who bangs their head against the wall from 2013 to 2018. This is lightyears away from where we were. The commissioner funded the idea things were courtroomy came from what you would see a staff report in the terms of quality of discourse. This is truly, seriously, a completely different body almost. The only problem is that this strategy is uniquely poorly suited for fossil fuel industry because the core business is the problem so the esg strategy and framework for esg issues more producely, i think this is the most comprehensive and amazing plan i have seen. I guess the concern here is that engagement with fossil fuel companies as we have argued for many, many years and presented reams of paper on is fairly fruitless and measured in how Many Companies replied or responded. Not in terms of what we are doing together with them. I dont see anything about active Shareholder Resolution ifs. This is something they committed to in 2015 or 2016. There is a lot to do but probably should move to level three. Thank you. Any more Public Comment . This is a discussion item only. Sorry i didnt see you. I am david page. Some of you remember me from meetings past. I started collecting my pension about five years ago and i have been to meetings here trying to advocate for esg, more esg investments. Like jed was just saying, we moved the needle in a positive direction. Since we are speaking about the esg update, i would like to comment about the s part of the esg. We have a fantastic, thoughtful report put outlined b o put outy andrew. What i would like to recommend is you do something similar. It is so easy to whip out in five minutes. I would like to see something done for the s part. Some of the characters that we are currently invested with are friends o of Valdimar Putin and those who dont share a commit commitment to human rights. There is not a lot of homework of the worst of the worst. Who are we invested in bringing us is most return on investment even though they might be engaged in torture or murter. I dont believe you can take action until you get the information. Thank you very much. I appreciate it. This is discussion only. We will continue to item 8. Action item. Annual report and recommendation on investment restriction in u. S. Tobacco companies. This is an update on level three of our esg policy. It includes a recommendation. Thank you. A quick update on the us tobacco restriction. We have had this in place since 1998, the year that u. S. Tobacco manufacturers entered the master Settlement Agreement with nearly every state attorney general. We currently are uses the recertain and data sources to determine what companies are on the restricted list. We reevaluate each year to determine if companies should cot on or off the list. This year we recommend two new companies to the restricted list, neither of which we correctly have holdings in. We also recommend a few updates to the list to reflect name changes that Certain Companies have made over the last year. We are also recommending the removal of two companies from the list. One due to the fact it is delisted. The other because it was a tobacco distributor and the distribution revenue from tobacco has fallen below the 10 threshold. It does not manufacture tobacco products. Page 2 and 3 provide updates of the market for the last year. Smoking rates continue to decline. As you are aware Electronic Cigarette usage has caused concerns for a lot of people. I can answer any questions on that. We are now monitoring the impact of risk and return for each of our investment restrictions. It will include those in each separate report in addition to the aggregate report. As a refresher we have seen since 1998 an overall negative 99 million impact what we estimate for that time period. Appendix a contains the restricted list with the suggested changes noted through the use of red font and strike through. An independent fee would be the new list that reflects what the list would be if the board votes to approve it. Board questions . I make a motion to adopt staff recommendation. Second. One question. In appendix b i dont keep track of which company has which product. This issue about jewel, are they listed in here . Yes, the group owns a 35 stake in jewel. It was motion made and seconded. I have a question. Clarification in terms of impact you are tracking for the items that we are using. Would the 88 million, the way i understand it the impact to the Retirement Fund is 88 million less than if we had been investing in those tobacco industries. What is the basis of measure you held certain securities arpositions and we use that as a basesis to determine the 88 million. Help me understand that quickly. It is all based on a set of assumptions. That is what we used to hold and divested from . Basically if we started in 1998 and invested our entire public equity port foam leo in the index tracking strategy for the policy benchmark. Versus if we invested in the same strategy without the securities on the restricted listing. The company rebalanced any proceeds or losses from these investments. It is assumption, the best we could make to conduct this analysis. When we invest with different managers, they invest some actively, some passively, we dont know if they would have known or not owned these companies. This is a worth case scenario. 90 million impacts due to compounding over 20 years of those losses. Thank you. That is only one large piece of the portfolio. Public comment . I will call for the motion. All those in fair. A. Opposed. Nine action item. And report and recommendation on investment restriction in Companies Operating in sudan. Board members this is a update on our level three of our esp policy related to targeted investment in sudan and includes a recommendation. Our investment restriction is in place since 2006. That was sort of the height of the save our four movement well into the genocide that was occurring in the region. The situation has certainly evolved and changed exception then. I will walk through the key points right now. They are relevant over the last two years. In 2017, out going president obama basically issued an executive order to lift most comprehentive against sudan. That was reaffirmed by. Trump. By and large the sanctions on sudan have been lifted. There are certain sanctions in place, particularly those that relate to visibilities relating to sanctions. The u. S. State Department Still considers sudan to be a state sponsor of terrorism. We havent said the entire government is acting in accordance with the u. S. Wishes. These are important evolution over the last two years and certainly the situation on the ground there is currency a transitiontal government. There was a military crew this. An over though of the military. There is now a joint civilian Transitional Government in place. The goal is to transition to a democratically give ilian government over the next two years. There are flairians of violence against demsock see demonstrators. The underground statement. What we recommend here sort of in recognition of the progress, we propose not to add Additional Companies to our restricted list in 2019 but to maintain our current restricted list as it is in place with the objective of monitoring if ongoing situation in sudan. If the transition of power goes as we hope, the idea would be to recommend remove moolvie by the 2021 target when this would be fully complete. This differs from 2006 when we first put this in place. It is unclear to staff and i contacted the state department to inquire what the process would be where the u. S. Government with make an official determines that genocide is halted. In the absence of understanding what that process would look like, we are recommending basically the process i described of monitoring the situation on the ground, certainly if there is a flareup of violence, the military refuses to cease tire, if u. S. Reenters sanctions we would not change the recommendation about the investment restriction. If all goes as planned and we are comfortable that would be the trigger staff would use to recommend to the board to revoke or remove the investment restrictions. The government may change the policy and operations. But the operation of the Companies May not change. Is that possible . Meaning they would continue to do business in sudan . Yes doing business the way they were doing. Correct. It had to do with companies specific, not just about how oppressive the government could be. The government was selling out assets. Our investment restriction did we late to these companies doing business with the government of sudan or providing or doing miner aleer mineral ecktransaction or provides weapons to the government of sudan. To remove that restriction would imply if we are comfortable that the government in place is democratically elected and not enacting genocide on its citizens we are comfortable that companies can do business with that government. Be prepared it may be listed company by company if the company is still a bad character. Sure. That is how i understand the two pieces of puzzle. Go ahead. Your last statement was if the government is no longer committing genocide on its people. How are you measuring the behavior of the government to make this decision . Based on your recommendation. I think the two key areas to look to are our government posture towards the government of sudan, the u. S. Possdoor as well as other un members. We can look to organizations. That would be part of your recommendation . It is important to understand both how governments are treating the government of sudan as well as parties that are maybe on the ground and have a different view of what is happening. We have looked at both of those resources. They do have differing views how far the situation has been proved. You will provide as part of your recommendation edges we have. There are other issues since the initial genocide issues. There is a lot of other governments are critical of sudan for participating in modern day slavery. There is more issues that have come through generally. The more we invest the more we increase the institutions it provides for less of that. I would like to see a report making our final recommendation based this is on our no business list for a considerable amount of time, and it is in an area of the world under a lot more scrutiny. We need to look at the overall recommendations on the number of companies doing business and what those businesses would be. Trying to interact with the sudan ease government. Public comment . Commissioner. The recommendation on the memo is twoparts. One to at some point bring back to the board an analysis of the activities in sudan and whether or not we want to change our position or policy. That is something that is just a reevaluation in the future. The second part of the recommendation is not add on seven companies under the restriction. If we were to continue on with our policy we would add seven companies to the restrictive list. Part of the recommendation is to not add those seven on for the coming year. Walk me through why we would suspend the policy when we havent decided to stop the policy yet . This is in recognition that the situation has largely improved on the ground by many accounts. Not fully resolved in terms of human rights abuses. By and large the country is stable. There is a joint civilian and military government in place. Things seem to be progressing according to the plans that have been outlined by the government. With the seven companies that would be added to this restricted list would it require us to divest of any positions. Are there ones where we would potentially have to take our position and divest . Correct. Those are the only two . This would be on page 2 of the memo. In the third column 2. 36 million in the electric. 3. 94 million in se s iemens tht we could make subject to our investment restriction. The determination was that by and large the u. S. Has lifted sanctions. These companies are providing as commissionter pointed out services to the citizens, and i think there are necessary communication and Power Services that the citizens do need. There is a consideration here of and as we proceed and evaluate the benefits of allowing companies to operate in a Company Versus benefiting a government that is subject to sanctions or is enacting human rights abuses against citizens. That is the balance that we are trying to understand. They havent changed the investment policy as a result of the sanctions being liftedded, is that correct . We have seen two public funds in the u. S. Remove the restriction completely. New mexico education, then colorado Public Employees retirement. Our state funds here still seem to have restriction in place, although it appears that the legal mandate requiring them to do that has been repealed with the lifting of sanctions. That is not my legal opinion, just a reading of the law. I guess my concern is, i think people with funds leave the restrictions in place because they are monitoring the unrest in the country. Maybe the countries operating in the country under that same duress, right . I dont know if it is prudent to monitor it in the same sense . This is why our recommendation is sort of somewhere in the middle ground. We are not removing the restriction. It would apply to the companies we have determined previously fell under it, but pausing the expansion of it while we monitor the ongoing evolution. Before we call for Public Comment we need a motion. We need a motion before you speak. Is there a board motion . This is an action item. I will move to accept the staff recommendation on this. Is there a second . I will second it. The motion is made and seconded i heard a voice. Point of clarification. What is the staff recommendation . Twoparts. Can you reiterate . The recommendation to reaffirm the existing restricted lift that we have put in place since 2006 and has evolved over time. Not add any new companies to that list. Then monitor the progresses of the Transitional Government and come back with a recommendation what we should do Going Forward in a year. You are not barred to wait for another year. If you have useful recommendation to change it. This is what it is today. Thank you. The action item would come back to remove restriction. At any time a special stand alone section, but we are not there yet, but that is just to inform you that is what it would take. It seems like the investment operation has never stopped. We have the motion. The motion is made now speak under Public Comment. I thought you were going to vote for the motion without Public Comment. In addition to sudan, i would like you to put on your wish list to not invest in a country named china, Mainland China, not hong kong or taiwan. The Chinese People in Mainland China are governed by one of the most brutal governments of the world. Look at hong kong and tibet. If you Board Members lived in china, you would all be in the education camps right now. My recommendation is you dont have any direct investments in china. Obviously the investment in the s and p500 practically every company is invested there. You dont have to make any direct investments in china. I would like you to not invest in Mainland China. No further Public Comment i call the question. Those in favor of the motion. A. Opposed. Did you get that. One no. Commissioner chu was a no. That takes us to the next item. And all report and recommendation on investment restriction in firearms and ammunition manufacturers and retailers. This is related to our investments in firearms and ammunition, Manufacturing Companies and retailers. It does include a recommendation. Thank you. Provide an update here on the investment restriction on firearm and ammunition for manufacturers in place since 2016. We use the research and a variety of sources to determine what companies are in the criteria to make them subject to investment restrictions. Based on this review we recommend adding one Company Korean ammunition maker to the restricted list this year. We currently have no direct investment in this company. Also, i want to highlight on this item we have made efforts over the last year to engage with retailers of firearms, companies we have not divested from around the gun retail practices. The companies we have contacted were not as responsive as we hoped. We did get a letter back from Dicks Sporting Goods but did not directly engage with the company. We have seen a willing necessary for certain retailers, namely Dicks Sporting Goods and walmart. Walmart was forced to do that with the shooting in el paso earlier this year. They have taken steps to strengthen practices in response to be and customer concerns about their gun retail accident. They have taken out handguns in their stores completely and are strengthening the background check process. Duckducksduck dicks are dg inventory of certain products, preliminary evaluation says these stores outperformed therapies due to the merchandise they replaced the gun products with. In november last year we did become signatory to the responsible firearms industry along with 13 other investors. This is being staffed that is seeking to engage with manufacturers and retailers as well as the entire distribution chain of civilian firearms and ammunition to encourage them to put in place better and safer practices around the manufacturing andy sign of their products and retail practices. It is in recognition and consistent with Second Amendment rights. It is not seeking to get rid of the industry but engage it to operate in a safer way. We will continue engagement over the next year, and, hopefully, collabberate with other investors. We want to amplify our voice and engagement in this area. Board questions . This is an action item that will require a motion. I make a motion to accept staff recommendation. Motion made by commissioner chu, seconded by commissioner bridges. Public comment. Thank you. I am a resident of San Francisco. I read today Dicks Sporting Goods destroyed 5 million worth of guns. That is guns in all stores. The c. E. O. Was quoted as saying people say when i suggest things like that this we arent going to stop mass shootings. I say you may be right. If we save one life, isnt that worth it . I feel like this is an example when sociopaths are not in charge of corporations. I want to highlight the difference between what we are talking about some players in this industry and what we are talking about since 2013 with the fossil fuel industry since 1989, 1991, these companies could have been taking actions out of their own independent human moral drives or just a drive to make money from a resource that will not become scarce error time or unburnable over time by entities that will no longer be able to inhabit the plaplanet. Industry making moves is a possibility. That we have not seen in decades from the fossil fuel industry. We are way, way past the time of engaging in an orderly fashion to see if they will respond to a letter and need to get rid of these investments. Thank you so much. I would like you to have a talk with your Hedge Fund Managers to tell them they cant invest in firearms, tobacco and fossil fuels. I call the question. Those in favor of the motion say aye. Those opposed. That takes us to item 11. Action item annual report and recommendation on investment restriction in her malCoal Companies. Board members this is level three of the esp policy related to dievesment of thermal Coal Companies and it includes a recommendation. Thank you. We have had the investment restriction in place since 2017 for thermal Coal Companies. As we outlined and describe in the memo the industry has a weak outlook, it appears to be in decline. We continue to review our exposure to this sector using msci research and other resources and yearonyear derm based on criteria if we should add companies to the restricted list or remove them. This year we are identifying four new companies to add to our restricted list that derive more than half of their revenue from thermal coal. We currently have no direct investment in any of these companies. In addition, as we propose in october of last year in the climate update we engage with companies that receive less than half of their revenue but more than 10 of revenue from thermal coal. Between 10 to 50 of revenue from thermal coal. To understand their plans and strategic outlook for that segments of their business. Based on that review and our engagement with these companies, we are recommending restricting investment in 13 companies that did not respond to our engagement outreach or have not communicated any plans to exit or strategically review thermal coal business. We hold approximately 100,000 of direct investment in one of the companies and none in the remaining 12 companies. We recommend retaining ownership in three companies that receive between 10 to 50 of revenue from thermal coal because based on our engagement and reserve they do have plans to exit or drastically curtail the thermal coal activities. There are two Additional Companies that we need to obtain more information on before we can make a recommendation for those companies. So the list of all of these is on page 9 of the staff memo. I am happy to answer questions about any of those areas. I am prepared to make a motion to adopt staff recommendation. Second. Motion and second. Board questions . You might alter this list if more information comes in. Are any of these companies you mentioned we had a certain amount of holdings, are they with active Investment Managers or commingled funds . The page four outlines whether those are held in separate accounts or commingled funds. Whether they are held in an actively managed fund or not, we have not outlined here, but i could let you know. Some are in both . Okay. Commingled is awkward. That clarifies that. No further questions. Motion is made and seconded. Public comment. Hello everyone. I promised another retiree that i would mention the Energy Sector has been the worst performer in the past 10 years within the s and p. Coal is part of that. I hope you get rid of all coal three companies and two companies and all of the rest of them. Thank you very much. Thank you. We are very proud of having really struggled to get this process going. We appreciate staffs like the level of analysis and the systematic nay turof nay turf the analysis. On nature of the analysis. I will speak why it doesnt make sense to have these investments. In terms of good faith following the process you are talking about, i want to highlight using percentage revenue as a measure what defines a coal company has afalas see. They get a small amount of revenue from coal but have a huge percentage of the coal. The idea is if i had 51 of the coal but also 71 of the gold and 41 of timber and keel is do coal is doing poorly. I have 51 of the coal. Given the nature of the investment restriction is to do with carbon asset risk, how much coal they have, not how much revenue they are getting from coal, i would propose that actually you come back next month and make an amendment to your level three coal restriction, which uses the actual amounts of coal, basically the top 100 Coal Companies by reservoirs of coal they control and use that as the locust you are trying to pivot as opposed to revenue. A colorado go from a company could go from inside to outside with the assets. That does not change the material nature of the coal business. We are measuring the wrong thing entirely in this particular example. Thank you. I call the question. Those in favor of this motion for the staff recommendation police say aye. Opposed. That takes us to item 12. Action item. Annual update to strategies to address climate risk and recommendation on investment restriction in certain oil and gas companies. Board members. , this is an update on strategies to update climate risk. It is a threepronged recognition and information. This is an update on the effort to manage climate risk. As i am sure you are aware Climate Change is the single Biggest Issue we deal within the ability to Impact Global growth and have major negative implications for nearly every sector of the economy. We are already viewing negative impacts from Climate Change. Folks were faroff track from the necessary emissions caps we need to have in place to really avoid the most catastrophic effects of Climate Change through the end of the century. We believe some of the negative impacts from Climate Change that we as investors will feel are systemic in nature and likely very hard or impossible to fully diversify away from. While there are others we feel are likely to be more industry or Company Specific and there may be an ability to manage that risk. Those are the ones we are trying to focus on in our Climate Strategy approach. The climate update here is in three parts. First, i will provide a quick overview of the overall strategy we adopted october of last year to analyze and manage climate risk in the plan. Next i will discuss the updates to the framework to analyze oil and gas exposures and their Climate Transition risk. Lastly, we will provide an update on a new framework we developed to analyze the climb amount risk for the utilities sector. To start we adopted a four part framework to manage climate risk across the plan last october. This is an extension of the strategies to manage climate risk the board approved in the january 2018 meeting. The four pillars that form this are on page three of staff memo include investing capital, opportunities well positioned for the transition to a low Carbon Economy. Think renewable energy, low carbon technology. We make investments across this in the public and private market portfolio. It is a central part of climate Risk Strategy to provide capital for those opportunities that are Growth Opportunities but also are helping with the Energy Transition underway. Two is engage in efforts as we previously discussed. We are engaging with Companies Directly to understand if and how they are aligning the Business Model and strategy with transition to low Carbon Economy to inform or Investment DecisionsGoing Forward. Third, we do have divestment as part of our strategy where we have determined that companies have a high unmitigated risk from Climate Change that cant be addressed through engagement, we will restrict investment in them. As we discussed earlier we divested from the thermal coal sector by and large. I will provide an update in a minute on the target de investment in oil and gas. Fourth is advocacy given the climate risk has the systematic component i mentioned. We are trying to support climate regulation to protect capital cl markets over the longterm working with other investors to engage with policymakers and financial regulators in climate risk into the prudential policy. Fundamental for all of the work is research and analysis that we do to try to understand what makes a company well positioned to a low Carbon Economy versus one that doesnt. In october of last year we introduced this framework we developed to evaluate the risk for oil and gas sector. This involved using seven different metrics in four parts. Working with Carbon Tracker Initiative and influence map to develop key metrics and measures for this analysis. This resulted in the board voting to restrict investment in seven companies to put 24 Additional Companies on a watch year for a multiyear engagement from staff. We rerun this this year as we plan to do each year, and i will provide updates on what the outcome of that analysis is, but stepping back slightly, we also looked overall at the exposure to the oil and gas sector and do want to highlight we are meaningfully less invested in the oil and gas sector on both an absolute and relative basis compared to a year ago as well as five and 10 years ago. As of june 30th we had approximately 242 million or 2. 1 of the Public Market portfolio in this sector compared to 437 million or 3. 3 one year prior. We are meaningful underweight in this sector relative to the public equity policy benchmark as well by about 140 basis points. Over the past five years, our exposure dropped more than half to this sector and twothirds when measured on an absolute dollar basis, half on relative and twothirds on dollar basis. That is it. We continue to have material exposure to the sector so we continue to evaluate the risks. We have reone the quantitative analysis the outcome is consistent but incremental from last year. It begins on page 29 of the memo and consists of engagement recommendations and divestment recommendations. First, we propose to expand the watch list of companies from 24 to 36 companies. Really focus engagement on 12 companies where we have a meaningful Equity Investment in those companies. Those lists are specifically on pages 32 and 33 of our memo. If the board wishes to continue to pursue a phased divestment. We recommend adding six new companies to the restricted list for 3. 9 million from four of those companies, two other companies we do not have investment in. We recommend taking three companies off the restricted list that no longer appear to have high unmitigated risk but adding them to the watch list for monitoring and engagement. The list of companies we recommend for restriction, that is on page 30 of the memo. The goal here would be to continue to engag