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Request for Committee Action

A briefing memo explaining the purpose, background, and impact of the requested action.
Fossil Fuel Divestment Resolution (RCA-2020-00783)

ORIGINATING DEPARTMENT
Intergovernmental Relations
To Committee(s)
# Committee Name Meeting Date
1 Policy & Government Oversight Committee Aug 6, 2020
Lead Staff:
Gene Ranieri and Robin Garwood
Presented By:
Council Members Gordon and Schroeder
Action Item(s)
# File Type Subcategory Item Description
1 Resolution City Policy

Passage of Resolution urging the Minnesota State Board of Investment to start a process to fully divest from fossil fuels in 2020.

Ward / Neighborhood / Address
# Ward Neighborhood Address
1. Not Applicable
Background Analysis

In 2013, the City of Minneapolis adopted a Climate Action Plan. The plan is a road map to reducing the city's climate impact. The plan includes several strategies to reduce greenhouse gases (GHGs) and sets goals to be achieved by 2025. In addition to the Climate Action Plan, the City Council in 2015 took a related action that stated the link between the use of fossil fuels and climate change. The City Council approved a resolution urging the divestment in fossil fuels by private and public entities. More recently, in December of 2019, the Council approved a Climate Emergency resolution, which states that, “the global warming caused by human activities, which increase emissions of greenhouse gases, has resulted in a climate emergency that severely and urgently impacts the economic and social well-being, health and safety, and security of the city of Minneapolis; and demands a local, national, social, industrial, and economic mobilization of the resources and labor of the United States, the State of Minnesota, and the City of Minneapolis, at a massive scale to halt, reverse, mitigate, and prepare for the consequences of the climate emergency and to restore the climate for future generations.”

Since 2015 there has been an increase in efforts by local governments, higher education and faith-based organizations to adopt positions supporting divestment. In January 2020, New York City announced that it would, over five years, divest its pension funds in fossil fuel companies. Prior to the New York announcement, Washington, DC, was the first large city first to divest its pension fund of fossil fuels. Currently several cities and states such as San Francisco and New York are planning to or are discussing to divest in fossil fuels.

There are two main drivers of this trend towards pension funds divesting from fossil fuels: the moral imperative to fight climate change, and the volatility and underperformance of fossil fuel assets when compared to other, less risky investments.

The Minnesota State Board of Investment (MSBI) is responsible for managing the investment of approximately $91 billion in funds, including the retirement savings of current and former employees of the City of Minneapolis.

The MSBI has adopted a resolution that directs the divestment of thermal coal production. At its May 29, 2020 meeting, the MSBI adopted a resolution that states "the MSBI Executive Director shall implement a procedure, consistent with all applicable fiduciary duties, to remove publicly traded companies which derive 25% or more of their revenues from the extraction of and/or thermal coal as authorized investments in the MSBI's Combined Funds Investment portfolio." The resolution also details a procedure to report at subsequent meetings on the progress of the divestment of thermal coal. The resolution directs the Executive Director to complete the divestment in a "prudent and expeditious manner but no later than December 31, 2020."

The purpose of this resolution is to urge the MSBI, on behalf of current and former Minneapolis employees and climate activists, to build on its initial step of divesting from coal by divesting from all fossil fuel extractive industries, and to start the process of divesting in 2020.

FISCAL NOTE
  • No fiscal impact anticipated