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YOU CAN HEAR US RIGHT? OKAY.UH, WE'LL CALL THE MEETING TO ORDER.
[1. CALL TO ORDER/PLEDGE OF ALLEGIANCE/MOMENT OF SILENCE]
PLEASE JOIN ME FOR THE PLEDGE OF ALLEGIANCE.I PLEDGE ALLEGIANCE TO THE FLAG OF UNITED OF AMERICA AND TO THE, WHICH STANDS? STANDS.
ONE NATION UNDER GOD, INDIVISIBLE, WITH LIBERTY AND JUSTICE FOR ALL.
[2. ROLL CALL]
MADAM DEPUTY CLERK, YOU'LL BE DOING THE ROLL CALL.[3.a. AB 2978 Discussion/possible direction regarding investment strategies, including possible ESG investment principles.]
OKAY.ITEM THREE, SPECIAL BUSINESS AB 29 78.
DISCUSSION POSSIBLE DIRECTION REGARDING INVESTMENT STRATEGIES, INCLUDING POSSIBLE E S G INVESTMENT PRINCIPLES.
AND THAT WOULD BE SHERRY GOING TO BEGIN OR WOULD THAT'D BE KAREN, BE SHERRY.
UM, SO WE HAVE WITH US TODAY REPRESENTATIVES FROM P F M ASSET MANAGEMENT.
WE HAVE ANNETTE GUSTONE AND SARAH WALSH.
AND I WILL LET THEM KIND OF SHARE A LITTLE BIT ABOUT THEMSELVES TO GIVE YOU A LITTLE BIT OF THEIR BACKGROUND.
AND THEY HAVE A PRESENTATION THAT THEY'RE GONNA GO OVER AND, UM, ANY QUESTIONS THAT YOU MIGHT HAVE AS WE GO ALONG.
BEFORE WE BEGIN, CAN WE JUST SET SOME GROUND RULES AS FAR AS INTERRUPTIONS? IF YOU HAVE QUESTIONS FROM THE DAY, SO YOU WANT THEM AS YOU GO? YES, THAT WOULD BE GREAT.
ANY QUESTIONS? WE WELCOME, YOU KNOW, DURING THE PRESENTATION.
SO LET'S JUST TRY TO BE AS WE NORMALLY ARE, COURTEOUS OF EVERYBODY, BUT ASK THE QUESTIONS.
AND IF, IF I COULD ASK A, IF, I DON'T DUNNO IF PETE'S GONNA JUST SHOUT OUT QUESTIONS AS HE HAS 'EM.
'CAUSE WE MAY NOT RECOGNIZE THAT HE YEAH.
PETE, I CAN'T, CAN'T BECAUSE YOU'RE SMALL ON THE SCREEN.
SO JUST SHOUT OUT IF YOU HAVE A QUESTION.
SO I DON'T, I DON'T WANNA MISS YOU.
COUNCIL, WONDERFUL TO, TO BE HERE WITH YOU ALL TODAY.
UH, MY NAME IS ANNETTE GASTON WITH P F M ASSET MANAGEMENT.
I HAVE, UH, BEEN WITH THE FIRM COMING UP ON SIX YEARS AND I HAVE, UH, SPECIALIZED AS AN INVESTMENT ADVISOR, UH, WORKING WITH, UM, LOCAL MUNICIPALITIES FOR OVER 12 YEARS.
SO, UM, YOU KNOW, BORN, RAISED IN THE STATE OF ARIZONA, SO THIS IS WHERE I CALL HOME.
SO, UH, VERY HUMBLED TO BE HERE WITH YOU ALL.
I'VE BEEN WITH P F M ASSET MANAGEMENT FOR CAN YOU TALK, LAUREN, BRING THE MIC UP BECAUSE EVERYTHING'S RECORDED IN THE ROOM, SO IF YOU COULD JUST BRING THAT UP AND MOVE.
I'VE BEEN WITH P F M ASSET MANAGEMENT FOR ALSO AROUND SIX YEARS.
UH, I AM, I STARTED OUT WITHIN THE ANALYST POOL WHERE I KIND OF JUST WORKED ON A BUNCH OF DIFFERENT ANALYTICAL PIECES AND REPORTING FOR ALL OF OUR PUBLIC SECTOR CLIENTS.
AND SINCE THEN I HAVE NOW TRANSITIONED INTO MORE OF A SUSTAINABILITY FOCUS ROLE.
SO THAT'S WHAT WE'RE GOING TO BE TALKING WITH YOU ALL ABOUT TODAY.
ALRIGHT, SO JUMPING INTO THE PRESENTATION, WE PUT TOGETHER A BIT OF A STRATEGY OVERVIEW.
UM, WE'RE GONNA START WITH AN OVERVIEW IN HISTORY OF THE CITY.
WE'LL TALK A LITTLE BIT ABOUT THE INVESTMENT POLICY, HOW THAT ALIGNS WITH STATE STATUTE.
WE'LL LOOK AT THE OVERALL CASH FLOW, UM, DISCUSS A BIT OF SOME SECTOR SELECTION, LOOKING AT A SAMPLE PORTFOLIO POTENTIALLY AS WELL AS PORTFOLIO OPTIMIZATION.
AND THEN FOLLOWING THAT WE'LL GO THROUGH AN INTRODUCTION TO E S G INVESTING AND CONSIDERATIONS, UM, AS WELL AS SOME, UM, SUSTAINALYTICS AND THEN OUR APPROACH TO E S G INVESTING AND SOME EXAMPLES FOR E S G AND WHAT THOSE ACTUALLY LOOK LIKE AS AN OVERLAY IN AN ACTUAL PORTFOLIO AS WELL.
SO WE HAVE QUITE A BIT, BUT IF THERE, AGAIN, IF THERE ARE ANY QUESTIONS, PLEASE, WE WELCOME THEM AS WE GO THROUGH.
UM, I KNOW FOR MYSELF, IF I DON'T ASK, I WILL FORGET.
SO AGAIN, ANY QUESTIONS ARE WELCOMED.
ARE YOU ANTICIPATING A TWO OR THREE HOUR PRESENTATION? UH, WE'RE GONNA KEEP IT WITHIN THE, THE TWO HOUR TIMEFRAME.
UM, YOU KNOW, I'D APPRECIATE THAT.
SO, STARTING OFF WITH A BIT OF THE INVESTMENT POLICY REVIEW SPECIFIC TO THE CITY.
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WE LOOKED AT THE OVERALL, UH, CURRENT PORTFOLIO ALLOCATION AS THE PORTFOLIO IS ALLOCATED NOW BETWEEN THE PERMITTED SECTORS.ADDITIONALLY, WE LOOKED AT WHAT THOSE POLICY LIMITS ARE FOR ALL OF THOSE PERMITTED SECTORS, AND THEN WE COMPARED THAT TO ARIZONA STATE STATUTE.
SO BASED ON ARIZONA STATE STATUTE, UM, YOU KNOW, ALL OF THE SECTORS THAT ARE FOUND HERE ALONG THE LEFT ARE PERMITTABLE.
AND THOSE LIMITS PER THE POLICY FOR THE CITY AS WELL AS ARIZONA STATE STATUTE ARE A HUNDRED PERCENT.
NOT THAT WE FEEL IT'S PRUDENT TO INVEST UP TO A HUNDRED PERCENT IN ANY OF THOSE SPECIFIC SECTORS, BUT THERE IS THE FLEXIBILITY AND POSSIBILITY TO DO THAT.
UM, BUT AGAIN, WE DON'T FEEL THAT'S PRUDENT, BUT HAVING THAT FLEXIBILITY IS, IS ALWAYS ADVANTAGEOUS FOR DIVERSIFICATION.
SO CURRENTLY THE CITY'S PORTFOLIO, LOOKING AT THOSE ALLOCATIONS, 26% INVESTED IN FEDERAL AGENCIES.
SO, UH, GOVERNMENT SECURITIES AND THEN THERE'S ABOUT 1% IN NEGOTIABLE CDS, 24% IN MONEY MARKET FUNDS, AND 49% IN THE LOCAL GOVERNMENT INVESTMENT POOL, OR L G I P AS WE REFER TO IT MOST OFTEN.
SO THE PORTFOLIO AS IT IS NOW, HAS A VERY LIQUID MAKEUP.
UM, AND AGAIN, THAT'S SOMETHING THAT WE WOULD LOOK TO KEEP INTACT IS WE, UH, CREATE A SAMPLE PORTFOLIO FOR THE CITY.
WE WOULD CUSTOMIZE THOSE KIND OF ALLOCATIONS, UH, MAINTAINING THAT LIQUIDITY.
THE L G I P, WHAT, WHAT IS THAT INVESTED IN? IS IT IN THE SAME SORT OF, EXCUSE ME, SECTOR ALLOCATION OR INDIVIDUAL STOCKS OR MUTUAL FUNDS OR WHAT, WHAT'S THE INVESTMENT PORTFOLIO LOOK LIKE? SO FOR THE L G I P, FOR THIS SPECIFIC INVESTMENT, UM, FOR THE STATE, THERE ARE FOUR SEPARATE POOLS.
AND THIS IS SPECIFICALLY INVESTED IN POOL 500, WHICH IS A BIT OF, UH, AN INTERMEDIATE FUND.
UM, AND THERE IS A NUMBER OF SECURITIES WITHIN THAT BASKET.
SO IT'S NOT ANY SPECIFIC, UM, EQUITIES OR ANY SPECIFIC MUTUAL FUNDS, BUT IT'S ACTUALLY, UH, QUITE A FEW IN THAT POOL.
AND THAT IS, UM, VERY LIQUID OF COURSE AS WELL FOR THAT POOL 500.
ALSO, JUST SO YOU, SO THIS LIST OF LIKE WHAT'S ALLOWABLE TO BE INVESTED IN, IT'S A DIFFERENT LIST FOR L G I P.
SHERRY, MAY I ASK A QUESTION? GO AHEAD, PETE.
YES, THANK YOU FOR THAT SLIDE.
UH, THE COLUMN IS POLICY LIMIT.
IS THAT THE SEDONA POLICY LIMIT? YES, THAT IS THE, THE SEDONA POLICY LIMIT.
SHERRY, CAN YOU JUST SPEAK TO ME ABOUT PAGE SIX OF YOUR MEMO PACKET, PAGE NINE, WHERE WE TALK ABOUT CONCENTRATION DIVERSIFICATION, HOW WE HAD A 5% LIMIT EXCEPT FOR TREASURY AND GOVERNMENT SPONSORED.
UM, SO, SO THAT'S WHAT WAS IN THE POLICY THAT WAS ADOPTED BY COUNSEL? UM, DON'T REMEMBER OFF THE TOP OF MY HEAD.
I WANNA SAY IT WAS LIKE 2014 OR SOMETHING WHEN THAT WAS ADOPTED BEFORE MY TIME.
SO THAT, THAT WAS JUST A LIMIT, UM, THAT WAS BASED OFF OF WHAT THE, UM, STAKEHOLDERS AT THE TIME HAD DECIDED TO PUT.
SO, UM, WE'RE, WE'RE OPEN TO CHANGING THE POLICY, UM, ON ANY OF THAT.
SO, SO DOES SHOWING POLICY LIMIT OF A HUNDRED PERCENT, HOW DOES THAT CONFLICT WITH THE POLICY? THAT MIGHT SAVE 5% IN A, AND I GUESS 5% IS AN ENTITY.
IF YOU LOOK AT SOMETHING LIKE MORTGAGE BACK SECURITIES, THAT'S A BROAD CATEGORY SO THAT YOU COULD HAVE MORE, IT COULD BE MORE THAN 5%.
IS THAT, IS THAT HOW YOU'RE SHOWING THAT POLICY E EXACTLY.
AND, AND JUST TO ADD TO THAT AS WELL, UM, THE POLICY LIMIT IS FOR THE SECTORS AND THOSE ALLOCATIONS WITHIN THAT, VERY SIMILAR TO HOW WE ACTIVELY MANAGE A PORTFOLIO.
THERE IS A PER ISSUER LIMIT, WE TEND NOT TO GET OVER ABOUT 3%.
WE RECOMMEND, YOU KNOW, KEEPING IT ABOUT 5% PER ISSUER.
SO A A SPECIFIC ISSUER COULD BE, IF WE WERE LOOKING AT A CORPORATE NOTE, MAYBE THAT WOULD BE AMAZON CORPORATE.
SO WE WOULDN'T INVEST MORE THAN 5% IN THAT SPECIFIC ISSUER.
HOWEVER, FOR CORPORATE NOTES, THERE'S A HUNDRED PERCENT ALLOCATION FOR THAT SECTOR.
PETER, YOU COULD, YES, THAT ANSWERED THAT.
SO LOOKING AT THE CASH FLOW HERE, AND THIS IS SPECIFIC TO THE CITY'S CASH FLOW, WHAT OUR
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CASH FLOW MODEL DOES IS IT TAKES A DEEPER DIVE AT SOME OF THOSE HISTORICAL FACTORS.WE LOOK AT SOME OF THAT SEASONALITY AND THE BALANCES.
SO WHAT WE DID IS WE WORKED WITH THE CITY, WE COLLECTED THE LAST THREE YEARS OF MONTH END BALANCES TO ARRIVE AT THE CASHFLOW.
THE CASHFLOW HELPS US DETERMINE THE LIQUIDITY OR SHORT TERM ALLOCATION.
SO THAT'S GONNA BE MORE OF A 12 MONTH DURATION OR LESS.
BUT THEN ALSO LOOKING AT A CORE LONGER DURATION STRATEGY.
SO THAT IS WHAT WE LOOKED AT AS WELL.
WHAT WOULD THAT LOOK LIKE FOR THE CITY? UM, WE TOOK INTO ACCOUNT SEVERAL DIFFERENT FACTORS AS WELL, WHICH I'LL SHARE WITH YOU AS WE GO THROUGHOUT.
SO LOOKING AT SOME OF THOSE HISTORICAL BALANCES HERE AND SEASONAL FACTORS, THAT AVERAGE MONTHLY BALANCE IS A LITTLE OVER 68.8 MILLION.
SO THAT HISTORICAL FACTOR, THAT'S WHAT WE USED AS OUR BENCHMARK.
THAT THRESHOLD IS ABOUT A HUNDRED PERCENT.
SO ANYTHING ABOVE THAT IS WHERE WE SAW ADDITIONAL INFLOWS, IT WAS A BIT HIGHER.
ANYTHING BELOW THAT BENCHMARK ESSENTIALLY IS WHERE WE START TO PLAN FOR ANY OF THOSE POTENTIAL VALLEYS.
SO WE LOOKED AT THOSE PEAKS AND VALLEYS OVERALL FROM THE LAST THREE YEARS OF BALANCES.
SO BASED ON THAT MAY AND JUNE SEEMED TO BE THOSE PEAK MONTHS.
SO THAT'S WHEN MAYBE THERE'S ADDITIONAL REVENUE COMING IN, MAYBE ADDITIONAL SALES TAX OR THINGS OF THAT NATURE.
SO THOSE ARE THOSE PEAK MONTHS.
NOW, AUGUST AND SEPTEMBER IS WHERE WE SEE ADDITIONAL OUTFLOW.
SO THOSE ARE REALLY THE LOWEST POINTS OF THOSE BALANCES, WHICH IN, IN ALL HONESTY, WE'RE NOT ALL THAT LOW COMPARED TO WHERE THOSE CAN DEVIATE FROM.
SO, UM, YOU KNOW, MAINTAINED A REALLY AVERAGE MONTHLY BALANCE OVERALL.
NOW ON THE TOP RIGHT HAND SIDE, WE LOOK AT THOSE PORTFOLIO STATISTICS HERE.
SO TOTAL ASSET BALANCE THAT WE RAN THIS FOR, UH, A LITTLE OVER 78.5 MILLION WAS THAT FULL BALANCE AND THAT ANNUAL GROWTH RATE WAS VERY STRONG, JUST UNDER 14%.
SO 13.9% OF AN ANNUAL GROWTH RATE.
UM, SO KIND OF CONSIDERING A FEW OF THOSE THINGS, WHICH I MENTIONED WE WOULD KIND OF TALK ABOUT AS WE GO THROUGHOUT.
SO WE KNOW FOR THE CITY THAT, UM, THE CITY HAD A, A CORE PORTFOLIO BALANCE.
THIS IS AS OF JULY 31ST OF 19 AND A HALF MILLION, 43.3 MILLION OF THAT WAS IN EXCESS LIQUIDITY.
SO THAT TAKES INTO CONSIDERATION THOSE L G I P FUNDS.
UM, THE 19.5 MILLION IS WHERE WE SAW THAT FEDERAL AGENCY ALLOCATION.
SO LOOKING AT THAT ALLOCATION ON THE FIRST PAGE, IT WAS ABOUT 26%, 24%.
SO THAT'S WHERE THAT CORE BALANCE OR THAT LONGER INVESTMENT WAS.
BUT IN SPEAKING WITH THE CITY, ONE OF THE THINGS THAT WE ARE TAKING INTO CONSIDERATION IS WE'RE STARTING TO PUT TOGETHER A PORTFOLIO AND REALLY CUSTOMIZE THAT IS THERE'S SOME OUTSTANDING C I P PROJECTS.
SO WE KNOW THAT WE NEED TO KEEP THOSE FUNDS VERY LIQUID.
WE KNOW THAT THERE'S SOME UPCOMING PROJECTS THAT WE NEED TO ACCOMMODATE AND ACCOUNT FOR.
SO KEEPING THOSE FUNDS LIQUID TO MAKE SURE THOSE ASSETS ARE AVAILABLE AS THOSE PROJECTS ARE READY, THOSE INVOICES ARE COMING IN, YOU KNOW, IS SOMETHING THAT WE'VE TAKEN INTO CONSIDERATION.
SO ALTHOUGH THE GROWTH RATE HAS BEEN 13.9%, WE RECOGNIZE THAT THAT'S NOT GOING TO BE THE GROWTH RATE GOING FORWARD, THAT WE WANNA MAKE SURE THAT WE ARE TAKING INTO CONSIDER CONSIDERATION THOSE UPCOMING PROJECTS.
SO WE'VE WORKED WITH SHERRY AND THE TEAM TO MAKE SURE THAT WE ACCOUNT FOR THAT AND WHAT THAT SHOULD LOOK LIKE OVER THE NEXT FEW YEARS.
SO, YOU KNOW, VERY DIFFERENT THAN WHAT WE'VE SEEN HISTORICALLY.
WE'RE STARTING TO PROJECT WHAT THAT WOULD LOOK LIKE GOING FORWARD AS WELL.
SO GETTING AN IDEA OF WHERE SOME OF THOSE RECOMMENDATIONS WOULD BE JUST FOR A VERY GENERAL PORTFOLIO.
SO WE LOOKED AT A LIQUIDITY CUSHION OF ABOUT 15%, 20%, AND 25%.
UM, BASED ON THESE NUMBERS, OUR RECOMMENDATION IN FACT WOULD BE SLIGHTLY HIGHER BECAUSE OF THOSE UPCOMING C I P PROJECTS.
OUR RECOMMENDATION WOULD BE ANYWHERE FROM ABOUT 28 TO 30% LIQUIDITY.
SO KEEPING THE PORTFOLIO RELATIVELY SHORT.
AND THEN THE IDEA IN DOING SO IS THAT YOU WOULD HAVE MORE LIQUIDITY TO PLAN FOR THOSE PROJECTS.
BUT WE CAN STILL LOOK AT INVESTING A GOOD AMOUNT, SLIGHTLY LONGER TERM.
BUT THE WAY THAT WE WOULD DO THAT, UM, IS KIND OF STAGGERED THAT OUT.
SO WE WOULD HAVE MATURITIES IN A ZERO TO ONE YEAR RANGE, A ONE TO TWO, AND A TWO TO THREE YEAR, BUT NOT MUCH FAR BEYOND THAT.
WE WOULD WANNA KEEP THAT IN ABOUT THREE YEARS OR LESS.
BUT AS THOSE COME DUE AND MATURE, WE WOULD LOOK AT THE OPPORTUNITY TO REDEPLOY THAT EXCESS CASH
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IF IT'S NOT NEEDED IMMEDIATELY.AND MAYBE WE LOOK IN THAT ONE TO TWO YEAR DURATION 'CAUSE WE KNOW THAT WE HAVE A LITTLE BIT MORE MATURING.
SO WE'LL KIND OF LOOK AT WHAT THAT LOOKS LIKE AS WELL.
SO WE'VE ALREADY HIRED YOU, RIGHT? SO ARE WE GOING THROUGH THIS BECAUSE WE'VE HIRED YOU OR ARE WE GOING THROUGH THIS AS A PRECURSOR TO TALKING ABOUT E S G? IS THE LATTER.
MORE SO AS A PRECURSOR TO TALKING ABOUT E S G, AND THIS LOOKS AT HOW WE CUSTOMIZE THE PORTFOLIO MM-HMM.
SO GETTING AN IDEA OF BOTH OF THOSE, BUT IF WE WEREN'T CONSIDERING INVESTING IN E S G, WE WOULDN'T BE HAVING THIS MEETING TODAY.
IS THAT RIGHT? 'CAUSE WE'VE HIRED THEM AND THEY'RE GONNA GO DO THEIR THING AND THAT WOULD BE THE END OF IT.
OR WOULD WE, SHERRY WOULD WE STILL BE HAVING SOME SORT OF MEETING THAT'S COVERING THIS FRONT END STUFF? I I STILL THINK THAT WE MAY END UP MAKING SOME CHANGES TO THE INVESTMENT POLICY THAT WE WOULD WANT COUN COUNSEL TO APPROVE.
SO BASED OFF OF, OF THE APPROACH THAT WE GO.
SO, UM, CONSIDERING THAT JUST A, A QUICK OVERVIEW HERE.
THERE'S A LOT GOING ON, UM,
IT ALMOST MAKES ME FEEL LIKE I'M BACK IN CHEMISTRY LOOKING AT ONE OF THOSE PERIODIC TABLES.
BUT, UM, I'LL EXPLAIN IT HERE.
SO ON THE LEFT HAND SIDE IS JUST THE OVERALL INDEX.
UH, FOR EXAMPLE, ONE TO THREE YEAR TREASURY ACROSS THE TOP IS EACH OF, YOU KNOW, THE LAST NINE YEARS.
SO AS WE PUT TOGETHER THE PORTFOLIO, SO THINKING BACK TO THOSE SECTOR ALLOCATION LIMITS, LOOKING AT TREASURIES, AGENCIES, CORPORATES, THE ABILITY TO HAVE FLEXIBILITY WITHIN THOSE PARAMETERS IN INVESTING ACROSS PERMITTED SECTORS REALLY HELPS DIVERSIFY THE OVERALL PORTFOLIO.
SO, YOU KNOW, JUST LOOKING AT THE LAST FEW YEARS, SO 2022 SPECIFICALLY, UM, A B S HAD THE OVERALL BEST RETURN, UM, AGENCIES, YOU KNOW, UM, AND TREASURIES CAME IN NOT FAR AFTER THAT.
SO THAT'S JUST KIND OF WHAT WE'RE LOOKING AT.
BUT THIS JUST GIVES US AN IDEA OF RETURNS OVER THE LAST NINE YEARS.
UM, THIS IS JUST REALLY HISTORICAL SPREADS OVER THAT IN COMPARISON TO A TREASURY.
AND I'M ACTUALLY JUST GONNA SHIFT GEARS.
SO TALKING ABOUT PORTFOLIO OPTIMIZATION.
UM, AS WE'RE CONSIDERING THE BEST DURATION FOR THE PORTFOLIO, UM, AGAIN, KEEPING A LOT OF THE FUNDS A BIT SHORTER IN ANTICIPATION OF THOSE UPCOMING PROJECTS, WHERE WE REALLY LANDED IS THAT SECOND INDEX, A ZERO TO THREE YEAR US TREASURY INDEX.
UM, WE RECOMMEND THAT THAT WOULD BE MOST IN LINE WITH THAT OF WHAT THE CITY'S INVESTMENTS CURRENTLY LOOK LIKE WITH THOSE UPCOMING PROJECTS AND CAN REALLY MANAGE A, A PORTFOLIO, UM, WITHIN THAT ZERO TO THREE YEAR DURATION.
I THINK THAT MAKES THE MORE MOST SENSE, NOT GOING MUCH FURTHER BEYOND THAT THREE YEAR DURATION.
SO ON AVERAGE, THAT RETURN YEAR TO DATE HAS BEEN ABOUT 2.18%.
WE CAN LOOK AT SOME OF THOSE FLUCTUATIONS OVERALL, BUT I THINK THE MOST IMPORTANT SLIDE HERE IS THIS NEXT ONE.
SO THIS IS WHAT A SAMPLE PORTFOLIO IS THAT WE PUT TOGETHER, SPECIFIC TO THE CITY, TAKING INTO CONSIDERATION THE CASH FLOW, UM, SOME OF THE POTENTIAL MAKEUP OF THE CURRENT PORTFOLIO WITH THE WAY THAT, UM, THE INVESTMENTS ARE IN POOL 500, SOME OF THOSE CONSIDERATIONS.
SO OUR RECOMMENDATION WOULD REALLY BE BEGINNING WITH AN INVESTED AMOUNT, ANYWHERE FROM 40 TO 64 MILLION TO START, BECAUSE I KNOW THAT THERE WOULD BE SOME POTENTIAL LOSSES IN POOL 500.
SO WE WANNA BE CONSIDERATE OF THAT.
MAYBE NOT TAKING ALL OF THOSE LOSSES.
WE CAN LOOK TO HELP OFFSET SOME OF THOSE AS WE START TO INVEST SOME OF THOSE ASSETS.
BUT AGAIN, WE WANNA BE CONSIDERATE OF THAT.
UM, SO, YOU KNOW, MAYBE NOT NECESSARILY PULLING EVERYTHING OUT OF POOL 500, BUT MAYBE HARVESTING SOME OF THAT AS IT SHORTENS IN DURATION OR AS RATES START TO DROP IS WHEN WE REALLY WOULD RECOMMEND STARTING TO PULL SOME OF THAT, BECAUSE THAT APPRECIATION WOULD START TO COME BACK.
SO IN A ZERO TO THREE YEAR PORTFOLIO, THAT AVERAGE DURATION IS ABOUT 1.29 YEARS.
SO NOT VERY LONG UNDER ABOUT A YEAR AND A HALF.
AGAIN, MAINTAINING THAT SHORTER DURATION, THE GROSS YIELD FOR THAT PORTFOLIO THAT WE'RE LOOKING AT IS ABOUT 5.57%.
SO THAT'S BECAUSE RATES ARE VERY HIGH RIGHT NOW.
IT GIVES US THAT OPPORTUNITY TO TAKE ADVANTAGE OF WHERE RATES ARE AT.
BUT AS THE FED STARTS TO PIVOT AND DROP RATES, WE KNOW AT THAT POINT THAT'S GOING TO BE THE HIGHEST POINT OF THE MARKET.
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SO NOW WE'VE CAPTURED THAT AND WE CAN HOLD ONTO THAT FOR MUCH LONGER THAN POOL 500 OR SOME OF THOSE L G I P POOLS 'CAUSE THOSE TEND TO FALL VERY QUICKLY AS THAT RATE ENVIRONMENT CHANGES.AND WE WOULD MAINTAIN VERY HIGH CREDIT QUALITY.
SO FOR THE PORTFOLIO, VERY MUCH IN LINE WITH THE INVESTMENT POLICY, WE MANAGE TO SAFETY, LIQUIDITY, AND THEN RETURN IN THAT ORDER.
SO ONCE SAFETY AND LIQUIDITY HAVE BEEN MET, WE START TO LOOK AT THAT NEXT COMPONENT, WHICH IS THAT RETURN, THAT INCREMENTAL RETURN OVER TIME.
AND SO VERY HIGH CREDIT QUALITY IS IMPORTANT.
AND THEN ON THE TOP RIGHT HAND CORNERS, THAT SECTOR ALLOCATION, WHAT WOULD THE PORTFOLIO LOOK LIKE IF WE WERE TO INVEST IT AT THIS POINT? SO WE HAVE GOVERNMENT SECURITIES RANGING FROM AN ALLOCATION IN TREASURIES.
WE'RE STILL HEAVILY FAVORING TREASURIES OVERALL.
THEY'RE THE SAFEST, MOST LIQUID ASSET CLASS.
AND THEN AGENCIES, MAYBE A SMALL SLIVER TO M B S IF THERE'S AN OPPORTUNITY TO DO SO.
AND THEN WE GET INTO THAT CREDIT ALLOCATION.
SO COMMERCIAL PAPER HELPS MAINTAIN THAT DURATION.
SHORTER CORPORATE NOTES ARE GONNA BE ON THE LONGER DURATION.
AND THAT'S, YOU KNOW, A THREE YEAR DURATION, MAYBE THREE TO FIVE YEAR DURATION ON AVERAGE.
BUT YOU KNOW, BELOW IS WHERE WE LOOK AT WHAT THAT DURATION DISTRIBUTION WOULD BE IF WE WERE TO IMPLEMENT THAT.
SO A LARGER ALLOCATION IN THAT ZERO TO ONE YEAR, THEN A, A SLIGHTLY SMALLER 37% IN ONE TO TWO, AND THEN UNDER 25% OF THE PORTFOLIO LONGER.
SO AS THAT ROLLS SHORTER, WE WOULD REDEPLOY THOSE ASSETS IF NOT NEEDED.
UM, BUT THAT IS WHAT WE HAVE FOR JUST THE, THE CORE STARTING POINT FOR THE PORTFOLIO.
BUT I JUST WANNA PAUSE THERE BEFORE WE SHIFT GEARS TO E S G TO SEE IF THERE ARE ANY QUESTIONS.
UM, I KNOW THAT WAS A LOT AND I APPRECIATE THE QUESTIONS ALONG THE WAY, BUT AGAIN, WE CAN ALWAYS JUMP BACK IF THERE ARE ANY TOO
OKAY, HEARING NONE, WE'LL CONTINUE ONTO THE E S G PORTION AND WHAT THAT OVERLAY WOULD BE IN A PORTFOLIO LIKE THIS, BUT JUST GIVES US AN IDEA OF WHERE WE WOULD START.
AND E S G STANDS FOR ENVIRONMENTAL, SOCIAL AND GOVERNANCE.
AND WE'RE GONNA GO THROUGH AN OVERVIEW THANK YOU IN A BIT.
SO I WANTED TO KIND OF KICK OFF TODAY WITH JUST AGAIN, THAT OVERVIEW OF WHAT E S G INVESTING MEANS, UH, JUST TO MAKE SURE WE'RE ALL ON THE SAME PAGE.
I KNOW SOME OF YOU MIGHT, UH, SOME OR MOST OF YOU PROBABLY HAVE A, A GOOD IDEA OF WHAT IT MEANS ALREADY.
UH, BUT JUST, UM, CONTINUING THROUGH HERE.
SO, E S G STANDS FOR ENVIRONMENTAL, SOCIAL AND GOVERNANCE, AND IT REFERS TO HOW A COMPANY IS PERFORMING IN EACH OF THOSE THREE AREAS.
UH, SO IT'S INCORPORATING NON-FINANCIAL MATERIAL, NON-FINANCIAL RISKS INTO THE INVESTMENT DECISION MAKING PROCESS.
AND IT'S JUST ANOTHER WAY TO KIND OF EVALUATE RISK FROM A DIFFERENT PERSPECTIVE.
SO ENVIRONMENTAL FACTORS COULD INCLUDE, YOU KNOW, HOW A COMPANY IS TREATING THEIR ENVIRONMENT, WHAT ARE THEIR CARBON EMISSIONS, UM, WHAT KIND OF DEFORESTATION DO THEY CAUSE, UM, IS THERE ANY AIR POLLUTION, WATER POLLUTION, THINGS OF THAT NATURE.
AND IT'S PROBABLY THE MOST, UM, EASY TO UNDERSTAND.
AND THEN AS WE MOVE INTO THE SOCIAL AND GOVERNANCE, MAYBE THOSE AREN'T THINGS THAT COME, COME TO YOUR MIND RIGHT AWAY, BUT SOCIAL REFERS TO HOW A COMPANY TREATS ITS EMPLOYEES AND THE COMMUNITIES IN WHICH THEY OPERATE.
THIS CAN MEAN EMPLOYEE BENEFIT PACKAGES, D E I EFFORTS, DATA PROTECTION, IF THEY'RE HANDLING, YOU KNOW, SENSITIVE INFORMATION, UM, AND AND THINGS OF THAT NATURE.
AND THEN GOVERNANCE FINALLY, UH, IS JUST HOW A COMPANY IS LED.
SO WHAT'S THE BOARD COMPOSITION LIKE, WHAT'S THE EXECUTIVE COMPENSATION? IS THAT TIED TO ANY INCENTIVES? DO THEY HAVE ANY PUBLICLY EXPOSED, UH, CONTROVERSIES OR CORRUPTION AND THINGS LIKE THAT.
SO WHY WOULD AN INVESTOR WANT TO IMPLEMENT AN E S G STRATEGY? THERE ARE A FEW REASONS OUTLINED ON THIS PAGE HERE, THOUGH.
BUT ONE OF THE MAIN REASONS THAT WE SEE FROM OUR CLIENTS IS THAT THEY WANT TO BETTER ALIGN THEIR INVESTMENT, UH, PORTFOLIO WITH THEIR CORE VALUES.
SO PERHAPS THEY REALLY VALUE E S G FRIENDLY INITIATIVES AND THEY WANT TO JUST INCORPORATE THAT INTO, UM, THE DECISION MAKING PROCESS FOR SECURITIES.
ANOTHER EXAMPLE IS EXTERNAL PRESSURE.
SO MAYBE IT'S, YOU KNOW, BOARD MEMBERS OR TAXPAYERS THAT ARE REALLY PUSHING FOR, FOR THIS INITIATIVE.
UM, AND, AND THEY WANT TO AVOID THOSE SEEMINGLY, OR WHAT COULD BE PERCEIVED AS CONTROVERSIAL COMPANIES OR INDUSTRIES IN YOUR PORTFOLIO.
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ALSO RISK MANAGEMENT.AS I SAID EARLIER, E SS G INVESTING IS REALLY JUST ANOTHER WAY OF INCORPORATING RISK MANAGEMENT.
IT'S JUST EVALUATING THE RISK THROUGH A DIFFERENT LENS INSTEAD OF JUST PURELY THE FINANCIAL COMPONENT.
AND THEN FINALLY, THERE'S CERTAINLY A VIEW THAT EXISTS THAT BECAUSE THESE COMPANIES ARE REALLY PRIORITIZING THESE E S G TYPE ISSUES, THEY'RE GOING TO HAVE MORE STABILITY IN IN THE LONG RUN.
AND THAT COULD LEAD TO, UM, MORE COMPETITIVE RETURNS OVER TIME.
BUT THERE ARE ALSO SEVERAL CHALLENGES WHEN KIND OF THINKING ABOUT E S G, UH, MOST NOTABLY THAT THERE'S NO UNIVERSAL DEFINITION OF E S G.
IT CAN MEAN SOMETHING DIFFERENT AS YOU GO FROM INVESTOR TO INVESTOR AND HOW THEY WANT TO INCORPORATE IT INTO THEIR PORTFOLIO.
OR AS YOU GO FROM DIFFERENT RATING AGENCIES OUT THERE, HOW THEY DEFINE E S G RISK, IT MIGHT DIFFER.
SO THAT JUST MAKES IT HARD TO COMPARE AND THAT'S WHY YOU HAVE TO, UM, JUST UNDERSTAND HOW THAT IS HOW E S G IS BEING VIEWED WHEN YOU'RE CONSIDERING THESE TYPES OF INVESTMENTS.
AND THAT'S WHAT WE'RE GOING TO WALK THROUGH TODAY.
A UH, AND WHILE I'M ON THAT TOPIC, THERE IS THERE, THERE ARE A FEW PROPOSALS OUT FROM THE S E C THAT WE'RE KEEPING AN EYE ON.
WE'RE EXPECTING SOME, UM, UPDATED REGULATORY INFORMATION ON E S G INVESTING AND COMPANY CARBON EMISSIONS IN THE NEAR FUTURE, PROBABLY WITHIN, UH, THE NEXT SIX MONTHS OR SO.
AND GREENWASHING IS ALSO AN ISSUE.
SO THAT'S WHEN A COMPANY, YOU KNOW, CAN MARKET SOMETHING AS AS GREEN.
UM, BUT IN FACT IT MIGHT NOT BE.
AND AGAIN, THAT JUST COULD BE BECAUSE THERE'S NO DEFINITION OF WHAT GREEN MEANS.
UH, SO WHAT ARE YOU EXPECTING FROM THE SS E C? YOU HAVE? HAVE THEY ISSUED ANY GUIDANCE? SO THEY HAD A FEW PROPOSALS OUT THAT WERE RELEASED IN EARLY 2022, AND THERE WAS THE, THE PUBLIC COMMENT PERIOD.
AND NOW THEY'RE REVIEWING THOSE COMMENTS TO CREATE THE FINAL RULING.
AND AGAIN, THAT'S SOMETHING WE'RE EXPECTING WITHIN THE NEXT SIX MONTHS.
UM, BUT THE, THE MAIN THING THERE THAT WE'RE GOING TO GET IS, UM, YOU KNOW, STANDARDS FOR COMPANIES RELEASING THIS INFORMATION TO THE PUBLIC.
SO THEY'RE GONNA RELEASE THEIR CARBON EMISSIONS IN ALL THE THREE SCOPES, IF YOU'RE FAMILIAR WITH THAT CONCEPT.
THEY'RE GOING TO HAVE TO, UM, ADDRESS, UH, ANYTHING RELATED TO, TO A VARIETY OF FACTORS RELATED TO THE ENVIRONMENT.
AND THAT'S REALLY GOING TO BE THE MAIN FOCUS FOR ON THE COMPANY SIDE.
AND THEN ALSO ON THE FLIP SIDE FOR THE INVESTORS, THERE'S ANOTHER PROPOSAL THAT'S KIND OF THE E S G PORT PROPOSAL AND IT'S GOING TO, UM, JUST CREATE, AGAIN, MORE STANDARDIZATION WITHIN WHAT COMPANIES, WHAT INVESTMENT MANAGERS AND INVESTMENT COMPANIES HAVE TO REPORT IN ORDER TO EXPLAIN TO THE PUBLIC HOW THEY'RE INCORPORATING E S G.
BECAUSE AGAIN, THAT, THAT TIES BACK TO THE GREENWASHING ISSUE.
SOME FUNDS ARE BEING MARKETED AS E S G WHEN IN FACT THEY MIGHT NOT REALLY INCORPORATE THAT, UM, IN ANY MEANINGFUL WAY.
SO THE RULING IS LIKELY CENTERED AROUND ESTABLISHING STANDARDS OF WHAT FACT SO THAT, UH, PEOPLE COULD LOOK AT THE SAME REPORTS FROM DIFFERENT ENTITIES AND UNDERSTAND THAT THEY WERE DONE THE SAME WAY.
I NEED THINGS SIMPLIFIED FOR ME.
AND ANOTHER CONCERN IS JUST, UM, YOU CAN SKIP TO THAT SLIDE.
IT WAS JUST PERFORMANCE, WHICH WE, WE DETAIL HERE ON THIS PAGE.
UH, SO WE SHOW TWO SETS OF INDICES, AND IN EACH OF THE SETS WE HAVE THE MASTER INDEX AND THEIR E S G COUNTERPARTS.
SO THESE ARE TWO, TWO INDICES ON EACH OF THE GRAPHS THAT ARE EXACTLY THE SAME FROM A, FROM A FINANCIAL PERSPECTIVE, SAME DURATION, SAME TARGETS, SAME SECTOR ALLOCATION, BUT THEY DIFFER IN THAT ONE INCORPORATES AN E S G STRATEGY AND ONE DOES NOT.
AND AS YOU CAN SEE, THE BARS ARE, ARE PRETTY MUCH RIGHT ON TOP OF EACH OTHER, QUARTER OVER QUARTER.
SO THEY'RE SEEING THE SAME EXACT RETURNS, IF NOT WITHIN A FEW BASIS POINTS OF ONE ANOTHER.
AND I SHARED THIS LITTLE ANECDOTE LAST TIME I WAS WITH, UM, THE, THE, THE CITY, BUT WE ACTUALLY DO HAVE A CLIENT OF OURS THAT WAS ONBOARDED ABOUT FOUR YEARS AGO, BACK WHEN E S G WAS KIND OF REALLY, REALLY GETTING STARTED, AT LEAST IN THE PUBLIC SECTOR.
UH, AND THEY OPENED UP TWO PORTFOLIOS, ONE WITH AN E S G FOCUS AND ONE WITHOUT 'CAUSE THEY WANTED TO DO, YOU KNOW, THEIR OWN LITTLE CASE STUDY.
AND WHAT WE FOUND OVER THE PAST FOUR YEARS THAT THEIR PORTFOLIO HAS BEEN OPEN IS THAT THERE IS NO PERFORMANCE DIFFERENCE BETWEEN THE TWO.
[00:30:01]
WITH THIS, THEY'RE WITHIN A FEW BASIS POINTS OF ONE ANOTHER.AND BEFORE WE REALLY DIVE INTO, UM, OUR APPROACH AND HOW THE CITY CAN UTILIZE OUR INVESTMENT SERVICES TO CREATE THEIR OWN E S G PORTFOLIO, AGAIN, JUST WANTED TO PAUSE AND SEE IF THERE ARE ANY ADDITIONAL QUESTIONS.
SO WE PARTNER WITH MORNINGSTAR'S SUSTAINALYTICS.
UH, THEY'VE BEEN A LEADER IN THE INDUSTRY FOR ABOUT OVER 30 YEARS, AND THEY HAVE DEDICATED ANALYSTS THAT THOROUGHLY REVIEW OVER 14,000 COMPANIES, PUBLIC AND PRIVATE.
AND THEY CREATE WHAT'S KNOWN AS THE E S G RISK RATING, WHICH IS A SINGLE METRIC THAT ALLOWS YOU TO COMPARE CO COMPANIES ON AN APPLES TO APPLES BASIS NO MATTER WHAT INDUSTRY THEY'RE IN OR, UM, WHAT WHAT THEIR MISSION IS AS A COMPANY.
SO YOU CAN, UH, COMPARE AN OIL AND GAS COMPANY TO, UM, A BANK, AND IT'S ALL THIS WITHIN THE SAME SCALE.
AND THAT SCALE IS FROM ZERO TO 100, UH, WHICH WILL GO OVER THE CALCULATIONS IN A BIT, BUT THAT THEN TRANSLATES TO A, A CATEGORY OF LOW, OF NEGLIGIBLE LOW, MEDIUM, HIGH, AND SEVERE.
SO THAT'S HOW YOU WOULD INTERPRET THE NUMBER FOR, FOR THE RISK.
SO HOW IS THIS RISK RATING DETERMINED EXACTLY? WELL, IT'S A MEASURE OF THE TOTAL OUTSTANDING E S G RELATED RISK, UH, THAT MIGHT HAVE A, A MATERIAL IMPACT ON THE COMPANY'S, UH, BUSINESS AND THEIR WELLBEING.
SO IT'S MADE UP OF TWO COMPONENTS.
THERE'S THE, THE UNMANAGEABLE RISK, UH, AND THE MANAGEMENT GAP.
AND I GO THROUGH KIND OF WHAT THESE MEAN ON THE NEXT PAGE HERE.
SO IF YOU WOULDN'T MIND JUST SKIPPING AHEAD.
SO EACH COMPANY IS GROUPED INTO AN INDUSTRY AND THEN A SUB-INDUSTRY.
AND ALL ISSUERS WITHIN THE SAME SUB-INDUSTRY ARE, ARE VERY MUCH RELATED TO ONE ANOTHER.
THEY'RE HAVE THE SAME, YOU KNOW, BUSINESS GOAL.
THEY'RE VERY MUCH PEER GROUPS WITHIN THE SAME PEER GROUP.
AND SO THEY, THEY FACE THE SAME E S G RISKS AND E S G ISSUES THAT THEY HAVE TO CONSIDER.
AND THAT IS WHAT WE CALL THE, THE TOTAL EXPOSURE.
SO THIS IS, UH, THE TOTAL REALM OF POTENTIAL RISKS THAT A COMPANY CAN FACE GIVEN THE THE INDUSTRY IN WHICH THEY OPERATE.
AND AGAIN, THAT EXPOSURE WILL BE THE SAME FOR ALL ISSUERS WITHIN THE SAME SUB-INDUSTRY.
FROM THERE, THE, THE TOTAL RISK CAN BE DIVIDED INTO WHAT'S DEEMED, UH, MANAGEABLE AND UNMANAGEABLE.
AND AS THE NAME SUGGESTS, MANAGEABLE RISK, UH, MEANS THAT IT'S SOMETHING THAT THROUGH PROPER POLICIES AND PROPER PROCEDURES, THE COMPANY CAN KIND OF MANAGE AWAY THAT RISK.
UM, WHEREAS, UH, UNMANAGEABLE IS SOMETHING THAT'S KIND OF ALWAYS GOING TO BE THERE.
UH, IT'S INHERENT IN THE, THE INDUSTRY IN WHICH THEY OPERATE.
SO FOR EXAMPLE, IF IT'S AN OIL AND GAS COMPANY, NO MATTER HOW MUCH THEY TRY, YOU KNOW, THEY'RE ALWAYS GONNA HAVE SOME SORT OF, UH, NEGATIVE CARBON OUTPUT.
SO THAT WOULD BE AN EXAMPLE OF AN UNMANAGEABLE RISK.
AND WITHIN THE MANAGEABLE RISK, UH, THIS CAN BE DIVIDED INTO WHAT'S MANAGED AND WHAT IS NOT.
AND THAT WOULD FALL WHAT'S IN THE MANAGEMENT GAP.
AND THEN AS WE MOVE TO THE RIGHT, WE SEE THE FINAL FIGURE OUTLINED THERE IN BLUE, WHICH IS THE E S G RISK RATING, AND IS THE COMBINATION OF WHAT FELL INTO THE GAP AND THE UNMANAGEABLE RISK.
SO AGAIN, IT IS THE TOTAL OUTSTANDING RISK THAT A COMPANY, UH, HAS.
SO ON THIS PAGE HERE, UH, I SHOW THE DIFFERENT CRITERIA THAT IS EXAMINED BY SUSTAINALYTICS, UH, FOR, FOR EACH COMPANY WHEN THEY DETERMINE THAT TOTAL EXPOSURE.
ALL OF THESE ARE DEFINED IN THE APPENDIX, BY THE WAY, UH, OF, OF THIS PRESENTATION, IF YOU WANTED TO REFERENCE THEM.
I KNOW SOME ARE MORE INTUITIVE THAN OTHERS FOR, FOR THE NAMES THEY CHOSE HERE.
UM, AND, AND NOT ALL COMPANIES ASSESSED INCLUDE ALL, OR ARE ASSESSED ON ALL 21 OF THESE METRICS.
THEY'RE GOING TO CHOOSE THE METRICS THAT ARE MATERIAL TO THAT SPECIFIC COMPANY, THAT SPECIFIC INDUSTRY, AND THEN GO FROM THERE.
AND EACH M E I, AND I'M GONNA GO THROUGH AN EXAMPLE OF WHAT I MEAN BY THAT EXACTLY IN A BIT HERE.
BUT EACH MATERIAL E S G ISSUE OR M E I CAN BE GROUPED INTO THE ES OR G CATEGORY.
AND AGAIN, THIS ALLOCATION WILL ALSO VARY BY SUB INDUSTRY.
SO FOR INSTANCE, THE OCCUPATIONAL HEALTH, UH, AND SAFETY, M E I IS, UH, MOSTLY AN S LINKED, SOCIALLY LINKED ISSUE.
[00:35:01]
FOR CERTAIN COMPANIES, IT CAN ALSO HAVE SOME SORT OF E COMPONENT AS WELL.SO THOSE WOULD BE COAL, STEEL, UM, OIL AND GAS COMPANIES LIKE THAT.
SO IF THERE WAS AN ACCIDENT ON THE JOB, THERE WILL ALSO BE SOME SORT OF ENVIRONMENTAL IMPACT.
AND THEN THOSE MEIS ARE ALSO JUST GROUPED INTO THE SAME CATEGORIES AS NEGLIGIBLE, LOW, MEDIUM, HIGH, AND SEVERE.
AND THE SUM OF ALL THE DIFFERENT MATERIAL, E S G ISSUES THAT ARE EVALUATED ALSO EQUALS THE OVERALL E S G RISK RATING.
SO THIS IS JUST A FURTHER BREAKDOWN OF THAT.
AND I'M SORRY IF IT'S GETTING A LITTLE CONFUSING.
THERE'S JUST A LOT OF INFORMATION HERE, AND I WANTED TO GIVE YOU GUYS A, A THOROUGH EXPLANATION OF WHAT'S INCLUDED.
UM, JUST SO I HAVE A BETTER UNDERSTANDING, I'M TRYING TO UNDERSTAND SOME OF THE LANGUAGE AROUND THIS.
SO THERE, THERE ARE THREE, UM, SIMILARLY TITLED AREAS, HUMAN CAPITAL, HUMAN RIGHTS, HUMAN RIGHTS SLASH YEAH, SUPPLY CHAIN.
JUST SO THAT I UNDERSTAND WHAT WE'RE TALKING ABOUT, IF YOU COULD JUST AS AN EXAMPLE, USE WHAT THE DIFFERENCE WOULD BE IN THOSE THREE AREAS SO THAT I CAN PROCESS THIS.
SO HUMAN CAPITAL WOULD REFER TO KIND OF, YOU KNOW, EMPLOYEE RETENTION, THINGS LIKE THAT, UH, AND HOW THEY'RE TREATING THEIR EMPLOYEES.
BUT THEN HUMAN RIGHTS MORE SO REFERS TO, UM, LIKE THE, THE RIGHTS THAT THE COMP THAT THE EMPLOYEES HAVE.
AND THEN THE SUPPLY CHAIN COMPONENT REFERS TO THAT IN, UM, THE COMPANIES THAT THEY THEN INTERACT WITH.
AND AGAIN, ALL OF THIS IS DEFINED IN THE APPENDIX.
AGAIN, THIS IS SUSTAINALYTICS METHODOLOGY, SO I'M NOT TOO FAMILIAR ON THIS, BUT I, YEAH, I WAS JUST LOOKING 'CAUSE I SAID I WANNA UNDERSTAND THE VOCABULARY.
YEAH, I THOUGHT THAT WAS A GOOD AREA FOR ME TO GET A MORE GENERAL UNDERSTANDING.
SO, I KNOW ALL THIS HYPOTHETICAL INFORMATION IS, MIGHT BE A LITTLE BIT CONFUSING.
SO WE GO THROUGH AN EXAMPLE HERE FOR WELLS FARGO ON THE NEXT FEW PAGES.
SO IF YOU'RE A MORE IN THE WEEDS PERSON, THIS IS FOR YOU.
AND IF YOU'RE A MORE HIGH LEVEL PERSON, JUST KIND OF SIT BACK FOR A FEW MINUTES AS WE WALK THROUGH THIS.
SO WELLS FARGO IS CLASSIFIED IN THE DIVERSIFIED BANKS SUB-INDUSTRY, AND THE TOTAL EXPOSURE FOR ALL COMPANIES IN THIS PEER GROUP COMES IN AT 58.4.
AS WE'RE SEEING ON THE LEFT THERE ON THAT SCALE OF ZERO TO 100 WITH HIGHER NUMBERS INDICATING MORE RISK, THE EXPOSURE IS BROKEN DOWN BY M E I OR ISSUE THAT LIST THAT I JUST WENT THROUGH ON THE LAST PAGE, ON THE NEXT SLIDE.
SO WE'LL COME BACK TO THAT, UH, WHERE THAT 58.4 FIGURE IS COMING FROM.
BUT JUST CONTINUING ON HERE FIRST, UM, YOU CAN SEE THAT A MAJORITY OF THEIR RISK THAT THEY HAVE EXPOSURE TO IS MANAGEABLE.
HOWEVER, MOST OF THAT RISK FALLS WITHIN THE MANAGEMENT GAP AND REMAINS UNMANAGED.
AND, AND JUST COMBINING, UH, THE FIGURES TO GET TO THE TOTAL OUTSTANDING RISK.
WE GET 36.2, WHICH IF YOU USE THE, UM, THE LITTLE SCALE THAT WE HAVE ON THE BOTTOM OF THE PAGE HERE, YOU CAN SEE THAT THAT FALLS WITHIN THE HIGH RISK CATEGORY.
UH, ON JUST THE NEXT PAGE HERE,
SO IF YOU RECALL THO THOSE 21 ISSUES THAT I MENTIONED EARLIER, UH, FOR THE DIFFERENT MEIS, THESE ARE THE RISKS THAT ARE ASSOCIATED WITH THE DIVERSIFIED BANKS SUB-INDUSTRY.
WE SEE THE DIFFERENT COMPONENTS THAT MAKE UP THAT EXPOSURE SCORE.
SO ALL THE WAY TO THE LEFT, WE'RE SEEING THAT 58.4 ONCE AGAIN.
AND THESE ARE THE ISSUERS, AGAIN, ISSUES AGAIN, THAT ARE, UM, DEEMED RELEVANT BY SUSTAINALYTICS FOR DIVERSIFIED BANKS.
HOW LONG DOES IT TAKE ONE OF THESE COMPANIES TO REHABILITATE? ITS E S G RATING? 'CAUSE LIKE WELLS FARGO IS WELL KNOWN FOR HAVING SCREWED OVER ITS CUSTOMERS, UH, MULTIPLE TIMES OVER, UH, PUTTING THEM ON PRODUCTS THEY DIDN'T AGREE TO TAKE ON AND THAT KIND OF THING.
SO HOW LONG DOES IT TAKE FOR SOMETHING LIKE THAT TO FLUSH OUT IN ONE OF THESE RATINGS? YES, THAT'S A GREAT QUESTION.
SO IT REALLY DEPENDS ON THE SEVERITY OF THE ISSUE.
AS YOU CAN SEE, WELLS FARGO, THAT WAS A PRETTY SIGNIFICANT EVENT IN THE EARLY TWO THOUSANDS, MID 2010S, UH, WHERE THEY, UM, OPENED UP, YOU KNOW, OVER ALMOST 4 BILLION ACCOUNTS, FOUR, 4 BILLION, EXCUSE ME, ACCOUNTS WITHOUT, UH, CUSTOMER KNOWLEDGE OR ANYTHING.
AND THAT IS STILL IMPACTING THEIR, THEIR SCORE.
AND THAT'S WHY THEIR SCORE SO POORLY WITHIN THE BUSINESS ETHICS CATEGORY.
AND THEY HAVE, YOU KNOW, I HIGHLIGHTED THEIR LEVEL FIVE CONTROVERSY, WHICH IS AS BAD AS IT CAN GET.
AND THAT THEN ALSO TRICKLES DOWN INTO THE HUMAN CAPITAL AND PRODUCT GOVERNANCE CATEGORY.
THAT'S ALL RELATED TO THE SAME EVENT.
SO IN SITUATIONS LIKE THIS, IT'S GONNA BE ON THERE FOR A REALLY LONG TIME.
[00:40:01]
IF IT'S JUST A SMALL, YOU KNOW, EMPLOYEE CAMPAIGN COMPLAINT, CUSTOMER COMPLAINT, IT'S PROBABLY ONLY GONNA BE THERE ON THERE FOR, FOR A BIT.BUT, UH, SUSTAINALYTICS IS CONSTANTLY LOOKING, EVALUATING ALL OF THESE COMPANIES, AND THEY HAVE LIKE LITTLE NEWS ALERTS THAT I GET WHENEVER SOMETHING HAPPENS WITH A SPECIFIC COMPANY.
UH, SO THEY DO A, A VERY THOROUGH JOB IN MY OPINION.
SO EACH OF THE MEIS, AGAIN, IS GROUPED INTO THAT UNMANAGED AND MANAGED PORTION.
AND SO, SO VISUALLY IF WE MOVE TO, UH, THE, THE MIDDLE BAR HERE, YOU CAN SEE THE WHITE IS THE MANAGED PORTION AND THE COLORED IS THE UNMANAGED.
AND THEN AS YOU MOVE FURTHER TO THE RIGHT, UH, ONLY THE COLORED PORTIONS REMAIN.
SO THAT'S, AGAIN, THAT UNMANAGED RISK AND THE MANAGED GOES AWAY.
SO WE'RE SEEING THE FINAL FIGURE REPRESENTING ALL THE OUTSTANDING RISK.
AND NOT SURPRISINGLY, MOST OF WELLS FARGO'S RISK COMES FROM THE BUSINESS ETHICS CATEGORY.
AND WE'RE GONNA WALK THROUGH THE, THIS SAME, UH, COMPANY AGAIN, JUST FROM A DIFFERENT PERSPECTIVE.
SO EACH OF THE ISSUES, SO THIS IS THE SAME BAR GRAPH.
UM, THE, THE RIGHTMOST COLUMN IS THE SAME GRAPH THAT WE SAW ON THE LAST PAGE, THE FINAL ONE THERE.
AND THIS IS JUST KIND OF A CONTINUATION OF THAT VISUAL.
SO EACH OF THE MEIS CAN BE GROUPED INTO THE E, S AND G CATEGORY.
SO FOR EXAMPLE, IF WE WANNA LOOK AT INTEGRATED E S G INTEGRATION, WHICH IS THAT FOUR SCORE IN DARK BLUE IN THE LEFT COLUMN, AS THEY MOVE TO THE MIDDLE COLUMN, YOU CAN SEE THAT IT HAS AN E CONTRIBUTION IN GREEN AND SS CONTRIBUTION IN ORANGE AND A G CONTRIBUTION IN, UH, LIGHT BLUE.
AND THEN SIMILARLY, PRODUCT GOVERNANCE HAS, UH, THE SOCIAL AND, UH, GOVERNANCE, UH, ALLOCATIONS.
AND AS WE MOVE TO THE RIGHTMOST COLUMN AND WE REARRANGE ALL THESE COLORS AND, AND TAKE THE TOTALS, WE SEE THE, THE FINAL SCORE OF 36.2, THAT E S G RISK RATING BROKEN OUT INTO THE E S AND G BUCKETS.
AND AGAIN, MOST OF THEIR RISK COMING FROM THE GOVERNANCE SECTOR.
SO DID YOU COMPARE AND, UH, WELLS FARGO WITH BANKS OF SIMILAR SIZE, YOU KNOW, BANK OF AMERICA, CITIBANK, CHASE, WHERE DO THEY STAND? IS WELLS FARGO WORSE? I, OR I BELIEVE WELLS FARGO IS ONE OF THE, THE WORST RATED BANKS OUT THERE JUST BECAUSE OF THAT SIGNIFICANT CONTROVERSY EVENT.
UH, BUT I WOULD HAVE TO LOOK AT THE, THE BANKS THEMSELVES.
I KNOW THAT THEY'RE, HOW THEY RANK WITHIN THE ENTIRE UNIVERSE OF, UM, THIS, THE DIVERSIFIED BANK SUB INDUSTRY IS VERY POOR.
SO, UM, THEY'RE PROBABLY, THEY'RE, THEY'RE DEFINITELY ON THE HIGHER END.
JUST CURIOUS, WHAT'S THE BEST BANKS? UH, I WOULD HAVE TO LOOK THAT UP.
WELL, WELL IT IS RATING, IT'S NOT SUBJECTIVE IF YOU'RE LOOKING AT THE SAME INDEX.
WELL, RIGHT, THAT'S WHAT I'M SAYING.
SO I'M JUST CURIOUS IF YOU KNOW OFF THE TOP OF YOUR HEAD, BUT THAT'S OKAY.
IF YOU COULD PROVIDE THAT LATER, THAT WOULD BE VERY HELPFUL.
WOULD YOU LIKE THE, THE THE BEST BANKS ON OUR APPROVED LIST OR JUST IN GENERAL? WELL, THE LARGE BANKS.
WE, WE HAVE TO USE LARGE BANKS.
MOST OF THE ISSUERS ON OUR APPROVED LIST ARE, ARE VERY LARGE BANKS.
SO HOW DOES THIS RELATE TO P F M AND WHAT IS OUR APPROACH EXACTLY? HOW DO WE INCORPORATE THE, THESE E S G METRICS INTO YOUR, UH, POTENTIAL APPROACH? AS WE'VE ESTABLISHED, WE PARTNER WITH MORNINGSTAR SUSTAINALYTICS AND LEVERAGE THEIR E S G METRICS.
SO WE AS P F M PROVIDE, UM, THE INVESTMENT STRATEGY MONITORING, REPORTING, UH, THINGS LIKE THAT.
AND, UM, ALL, ALL THE THINGS THAT WE WOULD TRADITIONALLY INCLUDE AS, UH, AN INVESTMENT MANAGER.
AND THEN IN ADDITION TO THAT, WE, WE LAYER IN SUSTAINALYTICS INFORMATION, WHICH I, I SHOW AN EXAMPLE OF THAT IN THE NEXT PAGE HERE.
SO THIS IS WHAT YOUR STRATEGY KIND OF COULD LOOK LIKE.
SO MAYBE IT'S VERY FLEX, FLEXIBLE AND CUSTOMIZABLE, AND MAYBE YOU WANNA SAY, UM, I DON'T WANT ANY ISSUERS IN THE HIGH OR SEVERE E SS G RISK CATEGORIES, OR YOU WANNA SAY, I DON'T WANNA INVEST IN COMPANIES IN SO AND SO INDUSTRY.
WE WOULD BE ABLE TO, UH, INCORPORATE THAT INTO YOUR STRATEGY.
AND IT, IT, IF YOU WANNA THINK ABOUT IT THIS WAY, IT'S, IT'S VERY, THE E S G RISK RATING OPERATES VERY SIMILARLY TO A CREDIT RATING.
JUST AS YOU MIGHT SAY, I DON'T WANT, I, I ONLY WANT A RATED OR BETTER FROM SS AND P.
YOU CAN SAY, I ONLY WANT MEDIUM OR BETTER FROM SUSTAINALYTICS.
[00:45:01]
AND ON THE NEXT PAGE HERE, WE JUST OUTLINE KIND OF THE STEPS IN ADOPTING AN E S G STRATEGY IF THIS IS SOMETHING THAT THE CITY WOULD LIKE TO PURSUE.SO FIRST AND FOREMOST, IT'S IDENTIFY YOUR E S G PRIORITIES AND YOUR OBJECTIVES, UH, WHICH IS WHAT WE'RE HERE TO DO TODAY.
SO HOPEFULLY WE CAN CHECK OFF, UH, BOX ONE AND THEN EVALUATE YOUR E S G OPTIONS AS WELL.
AND FROM THERE WE'LL HELP YOU TO UPDATE YOUR INVESTMENT POLICY STATEMENT, BECAUSE IF YOU'RE INTEGRATING THESE RULES, YOUR INVESTMENT POLICY SHOULD REFLECT THAT.
AND THEN OF COURSE, WE'LL ADOPT THIS INTO YOUR STRATEGY AND PROVIDE MONITORING ON AN ONGOING BASIS.
AND IF YOU'RE CURIOUS WHAT OUR REPORTING LOOKS LIKE, WE INCLUDE OUR, UM, E S G REPORTING SAMPLE IN THE APPENDIX OF THIS PRESENTATION HERE.
WE SHOW EXACTLY HOW WE'RE APPLYING THESE METRICS.
SO FIRST OF COURSE, WE'RE GOING TO ABIDE BY STATE LAW AND ANY STATUTES THAT APPLY TO, TO, UH, YOUR INVESTMENTS AND GOVERN THEM.
AND THEN, UH, THE, THE CITY'S INVESTMENT POLICY.
SO MAYBE YOU HAVE, UM, CERTAIN MATURITY LIMITS, CERTAIN SECTOR LIMITS, CERTAIN ISSUER LIMITS.
WE'RE GOING TO OF COURSE, FOLLOW THOSE AS WELL.
AND THEN WE GET TO STEP THROUGH, WHICH IS OUR APPROVED CREDIT LIST.
SO THIS IS FOR ONLY THE, THE, UM, CORPORATE ISSUERS.
WE HAVE A DEDICATED TEAM OF ANALYSTS THAT IDENTIFY A VARIETY OF DIFFERENT COMPANIES AND MAKE SURE THAT WE ARE COMFORTABLE, UH, INVESTING IN THEM AND WE'RE CONFIDENT IN THEIR FINANCIAL PERFORMANCE.
AND THAT IS THEIR, THEIR SOLE JOB AS, AS THE CREDIT COMMITTEE.
AND WHERE WE LAYER IN THE SUSTAINALYTICS INFORMATION IS ON TOP OF THIS CREDIT APPROVED LIST.
SO WE'LL FURTHER NARROW DOWN THE LIST BASED ON THE CRITERIA THAT YOU CHOOSE.
AND THAT CRITERIA IS OUTLINED ON THE NEXT PAGE HERE.
SO THIS IS REALLY KIND OF THE, THE KEY TAKEAWAY KEY, UM, DISCUSSION SLIDE FOR, FOR THE PRESENTATION TODAY.
AND THIS IS OUR MENU OF AVAILABLE PARAMETERS THAT WE CAN INTEGRATE INTO YOUR APPROACH.
AND AGAIN, WE APPLY THESE SCREENS TO THE CREDIT PORTION ONLY OF YOUR PORTFOLIO.
SO THIS ISN'T GONNA APPLY TO US TREASURIES OR AGENCIES OR, UM, MUNICIPAL OBLIGATIONS, THINGS LIKE THAT.
THIS IS ONLY ASSESSING, UH, CORPORATE RISK.
AND IN THE BLUE SECTION HERE, UH, WE LIST THE HIGH LEVEL METRICS WITH THREE DIFFERENT OPTIONS.
SO WE CAN, YOU CAN LIMIT ABSOLUTE E S G RISKS.
SO THAT WOULD BE USING THAT E S G RISK RATING THAT I KEEP REFERENCING AND SAYING AGAIN, HEY, I I DON'T WANNA INVEST IN ANYTHING IN THE HIGH OR, OR SEVERE CATEGORY OR OPTION TWO, YOU CAN EMPHASIZE MORE, A MORE RELATIVE RISK IF THAT'S HOW YOU WANT TO INTERPRET E S G.
SO EACH ISSUER IN THE SUB-INDUSTRY, THEIR RISK RATING IS RANKED AGAINST ONE ANOTHER, AND THAT DETERMINES THE SUB-INDUSTRY PERCENTILE, WHICH IS A RANKING OF HOW THAT COMPANY IS PERFORMING IN RELATION TO THOSE IN THEIR PEER GROUP.
SO AS AN EXAMPLE, THERE YOU CAN SAY ISSUERS MUST RATE WITHIN THE TOP 50TH PERCENTILE OF THEIR SUB-INDUSTRY AND ELIMINATE THE BOTTOM PERFORMERS, UH, THE BOTTOM HALF OF PERFORMERS WITHIN EACH GROUP.
AND THEN THIRD, THERE'S A HYBRID OF THE TWO.
SO MAYBE YOU WANT TO AGAIN, USE THAT MEDIUM OR LOWER RISK, BUT THEN SAY THEY CAN ALSO BE IN THE HIGH INDUSTRY, UH, HIGH CATEGORY, PROVIDED THAT THEY'RE ALSO A TOP PERFORMER WITHIN THEIR SUB INDUSTRY GROUP.
SO THE REASON THEY'RE BEING, THEY'RE SOME INDUSTRIES JUST, YOU KNOW, INHERENTLY TEND TO HAVE HIGHER RISK THAN OTHERS.
AND MAYBE YOU DON'T WANT TO JUST, YOU KNOW, WRITE THEM OFF RIGHT AWAY.
AND YOU WANT TO TAKE INTO CONSIDERATION IF THEY'RE DOING WELL RELATIVE THEIR, TO THEIR PEERS.
IN THE MIDDLE HERE, WE HAVE, UM, THE, THE ENVIRONMENTAL RISK METRIC.
SO WE HAVE A MAXIMUM ALLOCATION TO THAT, AND THAT'S 7.5 POINTS OF THAT, UM, E S G RISK BURNING METRIC.
THAT, THAT, AGAIN, I KEEP REFERENCING ON THAT SCALE OF ONE TO 100.
AND FROM THERE YOU CAN ALSO LAYER IN SOME INDUSTRY AND SUB-INDUSTRY EXCLUSION AS WELL AS, UM, BUSINESS ACTIVITY SCREENING.
SO YOU CAN ELIMINATE FOSSIL FUEL COMPANIES, YOU CAN ELIMINATE TOBACCO COMPANIES OR WITH REGARD TO THE, THE BUSINESS ACTIVITY SCREENING, MAYBE YOU DON'T WANT ANY INVOLVEMENT OR ANY SIGNIFICANT INVOLVEMENT IN SMALL ARMS PRODUCTION OR FOR-PROFIT PRISONS, THINGS LIKE THAT.
NOT THAT WE WOULD EVER, YOU KNOW, PURCHASE THOSE ANYWAY, BUT JUST TO HAVE THE OFFICIAL, UM, RULING THAT YOU CAN'T.
WHAT DO YOU MEAN YOU WOULDN'T PURCHASE THOSE ANYWAY? THEY'RE MOST LIKELY THEY'RE NOT ON OUR APPROVED LIST IF IT'S, IF THEY HAVE SIGNIFICANT
[00:50:01]
INVOLVEMENT IN, UH, I WAS REFERRING MOSTLY TO THE, UM, BUSINESS ACTIVITY.LIKE, WE'RE NOT GOING TO BE PURCHASING A FOR-PROFIT PRISON OBLIGATION 'CAUSE THAT'S NOT SOMETHING THAT WE WOULD DO.
I MEAN, WALMART HAS SOME INVOLVEMENT THERE.
WHAT, YOU KNOW, WALMART HAS SOME INVOLVEMENT THERE, BUT THEY'RE ON OUR APPROVED LIST, SO YOU COULD JUST, YOU KNOW, EXCLUDE COMPANIES THAT HAVE ANY INVOLVEMENT IN THAT.
BUT YOU SAID YOU DON'T, BUT WAL WALMART'S ON YOUR LIST.
AND THEY HAVE, THEY HAVE SMALL ARMS. YEAH.
IT'S, IT'S FAIRLY NEGLIGIBLE, BUT YEAH, JUST FOR THE SAKE OF THE ARGUMENT, WELL, THEREIN LIES THE ISSUE.
WE HAVE A TEAM THAT IS DEDICATED FULL-TIME, UM, TO RESEARCHING THOSE COMPANIES.
SO ALTHOUGH THEY MAY HAVE A VERY HIGH RATING, THEY MAY BE ON SEVERAL APPROVED LISTS.
UM, AN EXAMPLE OF THIS IS OUR CREDIT TEAM, MOST RECENTLY, UM, HAD REVIEWED, UM, SILICON VALLEY BANK AND WE WENT THROUGH THE RESEARCH, WE LOOKED AT THE MAKEUP OF THEIR DEPOSITORS, WE LOOKED AT THE OVERALL FUNDAMENTALS, AND THIS WAS ABOUT A YEAR AND A HALF TO TWO YEARS AGO.
AND ALTHOUGH THEY WERE RATED HIGH, THEY WERE VERY STRONG, WE DECIDED NOT TO PUT THEM ON OUR APPROVED LIST BECAUSE WE DEEMED IT TOO RISKY FOR THE TYPE OF PORTFOLIOS THAT WE MANAGE.
SO I JUST WANTED TO SHARE A LITTLE BIT OF AN EXAMPLE ON OUR CREDIT RESEARCH TEAM AND THE MEMBERS THAT WE HAVE DEDICATED TO THIS.
SO VERY SIMILAR TO THE E SS G PORTFOLIO, THERE IS A FULL-TIME TEAM THAT IS LOOKING AT THIS, LOOKING AT THE NEWS, LOOKING AT THEIR OVERALL FUNDAMENTALS BEFORE WE ADD THEM.
SO ALTHOUGH THEY MAY HAVE A HIGH RATING, WE TAKE AN EXTRA STEP TO MAKE SURE, DO WE FEEL COMFORTABLE ADDING THIS TO OUR PORTFOLIO? WHY OR WHY NOT? WELL, LET'S GO ON WITH THIS
SO NEXT WE JUST GO THROUGH AN EXAMPLE APPROACH, JUST SO YOU CAN SEE HOW THIS WOULD WORK IN ACTION.
SO USING THE EXAMPLE OF A HYBRID MODEL WITH ENVIRONMENTAL MAXIMUM AND SOME INDUSTRY EXCLUSIONS THAT I LAY OUT ON THE NEXT PAGE HERE, IF YOU WOULDN'T MIND, ANNETTE.
SO THE EXAMPLE PARAMETERS ARE LISTED IN DETAIL ON THE TOP RIGHT IN, IN THAT LITTLE CHART THERE.
SO WE HAVE THE MAXIMUM E S G RISK RATING OF MEDIUM OR LOWER, AND THEN THE, THE TOP PERFORMERS EXCEPTION THAT A COMPANY CAN RATE WITHIN THE HIGH, UH, RATING CATEGORY, PROVIDED THAT THEY'RE ALSO WITHIN THE TOP 25TH PERCENTILE OF THEIR SUB-INDUSTRY.
AND THEN OF COURSE, THAT ENVIRONMENTAL MAXIMUM OF 7.5 POINTS, UM, AND SOME INDUSTRY EXCLUSIONS RELATED TO FOSSIL FUELS AND TOBACCO.
SO IF WE APPLY THOSE METRICS TO, TO THE THREE COMPANIES LISTED ON THIS PAGE, APPLE, CHEVRON, AND THREE M, AS WE APPLY THE FILTER ONLY WHAT, UM, THE ENDING APPROVED ISSUER IS GOING TO BE ONLY APPLE.
AND LOOKING AT THE TABLE IN THE BOTTOM RIGHT THERE, WE CAN SEE WHY.
SO ALL OF THE ISSUERS MEET THE OVERALL CREDIT RATINGS OF THE PORTFOLIO.
UM, BUT CHEVRON HAS HIGH E S G RISK RATING.
THEY HAVE A HIGH ENVIRONMENTAL CONTRIBUTION.
THEY DON'T MEET THE TOP PERFORMERS EXCEPTION GIVEN, UM, THEIR SUB INDUSTRY RANKING.
AND THEY'RE IN THE OIL AND GAS COMPANY, UH, INDUSTRY.
SO THEY, THEY ARE EXCLUDED OF COURSE.
AND THEN THREE M ALTHOUGH THEY'RE, THEY'RE IN THE HIGH RISK CATEGORY, UH, THEY'RE ENVIRONMENT AND, AND THEY MEET THAT THE SUB-INDUSTRY RANKING PERCENTILE EXCEPTION.
SO THEY'RE BELOW 25, 20 FIFTH PERCENTILE THERE, THEIR ENVIRONMENTAL CONTRIBUTION IS TOO HIGH.
SO THAT'S WHY THEY'RE BEING EXCLUDED THERE.
HOW IS THAT THE ENVIRONMENTAL CONTRIBUTION DETERMINED AGAIN, PLEASE? SO THAT'S THE EXAMPLE THAT I WALKED THROUGH EARLIER MM-HMM.
BUT, BUT, BUT OKAY, LET ME REFINE MY QUESTION.
I WOULD ASSUME, THE REASON I ASK THAT IS WHEN I'M LOOKING AT HERE, I'M LOOKING AT APPLE AND THE PROCESSORS THAT ARE MADE, I'M EXPECTING THAT TO HAVE A HIGHER IMPACT THAN 1.1 VERSUS THREE M COMING IN AT 13.8.
THAT'S WHY I AM ASKING, THAT'S WHY I ASKED HIM WAY TOO BROAD AWAY.
SO I APOLOGIZE FOR THAT, BUT THAT'S WHAT I'M TRYING TO GET TO HERE.
SO THAT'S WHY I SAID WHY IS IT THAT WAY? BECAUSE I'M, I CAN'T PROCESS WHY THESE NUMBERS ARE SO DIFFERENT.
SO TO THE ONE SLIDE, OH, IT'S OKAY.
I DON'T, I DON'T THINK IT'S PARTICULARLY
[00:55:01]
RELEVANT.UM, SO, SO THAT'S A GREAT QUESTION.
UH, I WOULD HAVE TO LOOK MORE INTO THESE SPECIFIC ISSUERS.
I, I'M NOT SURE OFF THE TOP OF MY HEAD, BUT THREE M IS A CONGLOMERATE.
THEY'RE INVOLVED IN MANY DIFFERENT AREAS.
UH, THEY HAVE, THEY HAVE BUSINESSES KIND OF LIKE ACROSS THE BOARD.
SO THEY HAVE A VERY HIGH ENVIRONMENTAL CONTRIBUTION, UH, GIVEN WHAT THEY'RE INVOLVED IN.
I DON'T REALLY KNOW THE DETAILS OF THAT UNFORTUNATELY.
UM, AND THEN APPLE KIND OF THE SAME SITUATION.
THEY HAVE, UM, VERY, VERY LOW RISK OVERALL.
SO THERE'S REALLY NOT MUCH OF A CONTRIBUTION THAT COULD COME FROM THE ENVIRONMENTAL SECTOR.
I THINK THE ISSUE IS THAT THE OVER WHERE THEY PRODUCE THE, THE INNARDS, WELL THAT'S WHAT I'M ASKING KNOW.
THEY PRESERVE THE INNARDS, BUT WHERE THE WASTE PRODUCT FROM THE PRODUCTION GOES.
AND IS THAT TAKEN INTO ACCOUNT WHEN YOU TALK HERE ABOUT THE RATING? THAT'S MY, I THINK THAT'S THE INTENT OF YOUR QUESTION.
THAT SOMEWHERE ALONG THE LINE, AWFUL STUFF HAPPENS THAT'S INTEGRAL TO APPLE, BUT IT'S PROBABLY NOT APPLE ITSELF AS AN ENTITY.
IT'S SO IT MIGHT BE MORE OF THE SUPPLY CHAIN IS WHAT YOU'RE SAYING.
SO IS AND SUPPLY CHAIN ISN'T HERE.
I MEAN, IS IT HERE OR NOT HERE? IT'S FURTHER UP.
IT WAS ONE OF THE FACTORS THAT WAS CONSIDERED IN THE BIGGER LIST THAT WE LOOKED AT.
BUT YEAH, IT'S NOT REPRESENTED IN THIS, BUT THAT IS CONSIDERED IN THIS CHART.
THE, THE SUPPLY CHAIN IMPACTS ENVIRONMENTAL.
I, I DON'T BELIEVE IT'S TAKEN INTO CONSIDERATION FOR THE TECHNOLOGY HARDWARE SECTOR 'CAUSE IT'S NOT DEEMED MATERIAL.
UM, YOU'LL, YOU'LL FIND THAT YOU'LL OCCASIONALLY WILL NOT A AGREE WITH SUSTAINALYTICS INFORMATION, JUST AS YOU MIGHT NOT AGREE WITH, YOU KNOW, AS ANNETTE MENTIONED EARLIER, HOW WE AS P F M DID NOT, OUR CREDIT COMMITTEE, DID NOT AGREE WITH THE RATING AGENCY'S, UM, RATING OF, UM, SILICON VALLEY BANK.
WELL, YOU KNOW, WE ARE BEING ASKED TO MAKE A DECISION HERE, AND I THINK ALL OF US WANT TO BE VERY CLEAR ABOUT THE DECISION THAT WE'RE MAKING GIVEN THE FACT THAT THIS STUFF IS INCREDIBLY ARCANE MM-HMM.
AND SO WE'RE ASKING QUESTIONS TO TRY AND GET AT HOW ENVIR, HOW ACCURATE IS ENVIRONMENTAL ASSESSMENT IN TERMS OF YOUR RATINGS HERE MM-HMM.
AND I THINK THAT QUESTION WENT TOWARD THAT, THAT ISSUE.
SO THANK YOU VERY MUCH FOR ANSWERING.
AND AGAIN, THAT'S ONE OF THE, THE MAIN CHALLENGES IN THIS SPACE IS WHAT'S BEING REPORTED BY THE COMPANIES.
AND THAT'S WHERE THAT S E C RULING THAT'S, THAT'S COMING DOWN THE PIPELINE WILL REALLY KIND OF HELP RATING AGENCIES TO, TO COME UP WITH THESE RATINGS AND BETTER ASSESS THE COMPANIES AS WELL AS HAVING THE PUBLIC, UH, YOU KNOW, HAVING ACCESS TO THAT INFORMATION AS WELL.
WELL, WAIT, MAY OR MAY NOT, WE DON'T KNOW.
AND PART OF THE APPEAL OF KIND OF, UM, LEVERAGING A DATA PROVIDER IS THAT IT REMOVES THE, UH, THE CITY HAVING TO MAKE THAT CALL.
THEY'RE JUST LEVERAGING, UH, A THIRD PARTY TO KIND OF MAKE THAT DECISION OF WHAT WOULD BE SUITABLE AND WHAT'S NOT.
SO FROM A LIABILITY PERSPECTIVE, IT KIND OF, YOU KNOW, UH, PUSHES THAT RESPONSIBILITY ONTO THE DATA PROVIDER.
WELL, IT SEEMS LIKE THE SECTOR ANALYSIS OR A SPECIFIC COMPANY OR SECTOR LIKE OIL AND GAS, AT LEAST ON THE FACE OF IT, IS AT LEAST MORE UNDERSTANDABLE TO SOMEONE LIKE ME.
ANY OTHER QUESTIONS? PETE, ARE YOU GOOD WITH QUESTIONS, PETE? THANK YOU, MAYOR.
I'M, I'M GENERATING SOME THOUGHTS AND COMMENTS, SO AS, AS WE GO ON.
SO IF WE JUST TAKE A STEP BACK AND THINK ABOUT THIS FROM, UM, A, A, A HIGHER LEVEL.
SO THIS, THESE ARE ALL OF THE ISSUERS ON PFMS OR CREDIT LIST.
SO THERE ARE 210 COMPANIES, CORPORATIONS THAT MEET THE INVESTMENT PARAMETERS IN THE CITY'S CURRENT I P S.
UM, BUT THEN ONLY 173 OF THEM WOULD MEET THE CRITERIA IF YOU WERE TO IMPLEMENT THE EXAMPLE APPROACH THAT I JUST WALKED THROUGH.
SO KIND OF THE ONES THAT ARE ELIMINATED AND FALL OFF ARE IN THE INDUSTRIES OUT, UM, SHOWN IN, IN THE BOTTOM CHART HERE.
SO NOT SURPRISINGLY, WE HAVE A LOT OF OIL AND GAS PRODUCERS SINCE THAT'S EXCLUDED AS WELL AS A LOT OF OIL, UH, AUTOMOBILES SINCE THOSE TEND TO, YOU KNOW, BE E HEAVY, UH, INDUSTRIES.
REDEFINE PROBABLY FOR ME, I P S APPROACH, WHAT, WHAT DOES THAT MEAN? YOUR
[01:00:01]
INVESTMENT POLICY APPROACH.SO THAT WOULD BE WHAT'S PERMITTED FOR YOUR INVESTMENTS CURRENTLY.
UH, SO THAT TAKES INTO CONSIDERATION ANY CREDIT LIMITS, UH, THAT YOU CURRENTLY HAVE.
SO THESE MEET THE, THE SS AND P MOODY'S, UH, FITCH RATINGS FOR, UH, INVESTMENT CONSIDERATION.
AND THEN IF WE MOVE TO THE NEXT PAGE HERE, WE JUST BRIEFLY TOUCH ON HOW, UH, AN E S G APPROACH MAY IMPACT, UH, THE CITY'S PORTFOLIO.
WE DON'T CHARGE ANYTHING ADDITIONAL FROM A FEE PERSPECTIVE, AND THE FEES ARE DETAILED ON THE NEXT PAGE HERE, WHICH I'LL GET TO SHORTLY.
THE CITY WOULD NOT INCUR ANY ADDITIONAL FEES OUTSIDE OF THAT.
AND THEN CUSTODY AND TRADING COSTS WOULD ALSO REMAIN THE SAME.
DIVERS MIGHT BE SLIGHTLY MORE LIMITED, SINCE AGAIN, WE ARE FURTHER LIMITING, UH, IN RESTRICTING INVESTMENTS BASED ON THESE E S G PARAMETERS.
HOWEVER, WE'RE ALWAYS GOING TO ENSURE THAT WE CAN MAINTAIN PROPER DIVERSIFICATION TO THAT ISSUER MAXIMUM AS A NET SET OF ABOUT THREE TO 5%.
CAN I, COULD YOU GO BACK TO THE PRIOR PAGE FOR A MINUTE? I'M TRYING TO MM-HMM.
SO ARE YOU SAYING THAT UNDER OUR CURRENT POLICY THERE WOULD BE 210 ELIGIBLE AND IF WE ADOPTED THE E S G POLICY MM-HMM.
NOW, ARE THOSE 210 CURRENT INVESTMENTS? NO.
THAT IS WHAT IS ON PFMS APPROVED CREDIT LIST.
SO THAT'S THE KIND OF ENTIRE REALM OF ISSUERS THAT WE MIGHT INVEST IN FOR CORPORATE COMMERCIAL PAPER, UH, CDS, ANYTHING RELATED TO TO TO CREDIT.
SO WE WOULD GO FROM 210 ON YOUR APPROVED LIST TO 173 ON YOUR APPROVED LIST.
THAT, BUT THAT'S BASED ONLY ON THIS ONE EXAMPLE.
WHAT WE WENT TO WOULD BE 10 TO EXACT TOTALLY.
WE WOULDN'T NECESSARILY GO TO 1 73, MIGHT GO TO 180 2 OR WE MIGHT GO TO ONE 20.
AND THE LAST POINT HERE ON THIS PAGE IS JUST, UH, THE YIELD AND INVESTMENT RETURN IMPACT, WHICH IS FAIRLY NEGLIGIBLE, UH, UH, BUT THOSE FIGURES IN GENERAL WILL, YOU KNOW, LARGELY DEPEND ON PORTFOLIO COMPOSITION, CREDIT QUALITY, UH, LIQUIDITY INTEREST RATES, YOU KNOW, AS THEY ALWAYS DO IN THE, THE WORLD OF INVESTMENTS.
WELL, THAT COMES RIGHT TO THE QUESTION I HAD, WHICH IS, IS THAT 5.7 YIELD WHAT YOU'RE AIMING TO GET US? THAT IS, I, I GUESS WHAT I'M ASKING IS THE RELATIONSHIP BETWEEN DECISIONS WE MAKE AND YIELD
I MEAN, THE, ARE WE, ARE WE GONNA GET THE, ARE YOU GOING TO MAKE INVESTMENTS SO THAT THE YIELD, DEPENDING, REGARDLESS OF CATEGORIES WE MIGHT CHOOSE, IS THE SAME AS IT WOULD BE WITH NO, YOU'RE SAYING THAT THERE WOULD BE NO YIELD YES.
CONSEQUENCE TO E S G UH, DECISIONS.
THAT'S WHAT WE'VE OBSERVED IN, UM, OUR, OUR OWN, OUR SEPARATE, UH, PORTFOLIOS THAT WE MANAGE FOR OTHER ENTITIES.
AND BUT YOU DON'T GUARANTEE THAT.
NOBODY GUARANTEES THAT I KNOW THAT.
BUT YOU'RE, YOU ARE, THIS IS WHAT YOU ARE SAYING TO US IS THAT, BUT, AND THAT'S WHAT WE FOUND IN COUNCIL WILLIAMSON'S POINT, UH, IS DID, DID I UNDERSTAND THAT YOUR SLIDE 20 PACKET, PAGE 31, THAT THAT'S WHAT THAT ADDRESS SHOWING THAT THE RETURNS ON THE NON E S G AND THE E S G FOLLOW THE SAME PATTERN? YES.
SO THEREFORE WE SHOULDN'T EXPECT A LOWER, GENERALLY LOWER YIELD.
AND THAT OKAY, BECAUSE THERE, THERE IS THE, THERE IS IN THE, IN THE RUMOR MILL, I DON'T KNOW, IN, IN THE GENERAL, UH, ANTI E S G MESSAGING MM-HMM.
THAT YOU WOULD, YOU SHOULD EXPECT LOWER YIELDS.
AND I THINK THESE IN INDICES THAT WE'RE SHOWING HERE, THEY REALLY KIND OF REFLECT THE SAME, UH, CRITERIA THAT, UH, P F M IS USING.
THEY EVEN USE SUSTAIN ANALYTICS INFORMATION AS WELL.
SO WE THINK THAT THIS IS AN ACCURATE REPRESENTATION AND WHERE PERFORMANCE REALLY DIFFERS WITH REGARD TO E S G COMPANIES, E S G FRIENDLY COMPANIES, IT'S WITHIN THE EQUITY SPACE.
AND RIGHT NOW WE'RE TALKING ABOUT FIXED INCOME.
[01:05:01]
I HAVE, I THINK THAT'S ALSO IMPORTANT TO POINT OUT.WE'RE TALKING ABOUT CREDIT OR BONDS DEBT.
SORT OF A CURVE BALL QUESTION HERE, WHICH IS IN OUR INVESTMENT POLICY, THE GOALS OF SAFETY, LIQUIDITY, AND OPTIMAL YIELD, AND THERE'S LIKE A FOURTH PILLAR THAT IS NOT, THAT IS NOT IN THERE, THAT IS SOMETHING THAT I WOULD THINK, WHICH IS A CUSTOMER SERVICE.
AND I WANNA KNOW UNDER WHAT WE'RE LOOKING AT NOW, SLIDE UNDER THE LAST YIELD INVESTMENT, THE RETURN, WELL, IT'S NOT YIELD INVESTMENT RETURN, BUT JUST THE IMPACT OF, OF DOING THIS.
IS THERE A CUSTOMER SERVICE AS, AS, UH, THE VICE MAYOR POINTED OUT, THERE IS A, UM, SORT OF A, A MYTH OUT THERE THAT E OR BEING PROMOTED THAT E S G INVESTMENTS WOULD NOT GIVE YOU THE SAME RETURN.
IS THERE ALSO A MYTH THAT E S G INVESTMENTS DON'T GIVE YOU THE SAME RATE OF CUSTOMER SERVICE? I HAVE NEVER HEARD THAT BEFORE.
UH, WE HAVE A DEDICATED TEAM HERE, AND WE'RE GOING TO BE KIND OF, YOU'RE, YOU'RE ON, ON-CALL EXTENSIONS OF YOUR STAFF, AND WE, WE TEND TO BE VERY RESPONSIVE.
SO I, I WOULDN'T AGREE WITH THAT.
AND IF ANYTHING, YOU'RE ALSO ADDING IN OUR SUSTAIN LINUX RESOURCES AS WELL.
SO IT COULD BE, YOU KNOW, POTENTIALLY EVEN ONE STEP UP IF YOU THINK ABOUT IT THAT WAY.
JESSICA, YOU HAD SOMETHING TO ADD? UM, THIS IS LIKE, THIS IS LIKE GREEK, BUT, UH, AND SO I, I HAVE, I HAVE, MY MIND SAYS I HAVE QUESTIONS, BUT I CAN'T FORMULATE THEM.
THAT WAS THE PROBLEM I HAD FORMULATING.
I I GO BACK TO WHAT HOLLY SORT OF ITERATED, WHICH SAYS WE'RE TALKING ABOUT CDS AND GOVERNMENT ISSUES, RIGHT? NO, WE'RE TALKING ABOUT CORPORATE RIGHT NOW.
WE'RE TALKING ABOUT CORPORATE RIGHT NOW.
AND BUT THERE WOULD STILL NOT BE EQUITIES.
WE WOULDN'T BE BUYING THE STOCK.
RIGHT? WE WOULDN'T BE BUYING THEIR NOTES OR THEIR BONDS.
AND THAT'S WHY YOU HAVE APPROVED LISTS OF, UH, YOU WHY YOU HAVE AN APPROVED LIST.
WHY? IT'S JUST NOT ANYBODY IN THE WORLD.
THERE'S A VAST UNIVERSE OF AVAILABLE INVESTMENTS, BUT THEN WE NARROW THAT DOWN A LITTLE BIT MORE BASED ON ARIZONA STATE STATUTE.
WE NARROW IT DOWN A LITTLE BIT MORE BASED ON THE CITY'S INVESTMENT POLICY, ON, ON WHAT IS PERMITTABLE.
AND THEN AN ADDITIONAL OVERLAY OF THAT WOULD BE IF WE WERE TO IMPLEMENT E SS G, WHAT WOULD BE THOSE EVEN MORE GRANULAR DETAILS TO, OF INVESTMENTS TO EITHER ADD OR AVOID OR TAKE INTO CONSIDERATION.
SO BASED ON THAT, WE START BROAD AND THEN JUST KIND OF, UM, YOU KNOW, CAN I ASK, BRING IT IN A LITTLE MORE FROM THERE, SHERRY, I ALWAYS LIKE TO ASK WHAT STAFF THINKS.
I ALWAYS WANNA KNOW WHAT STAFF THINKS.
I WAS GONNA ASK THAT TOWARD THE END, BUT IT'S FINE.
I DON'T WANNA SPEND A LOT OF TIME TRYING TO DEFINE EXCEPTIONS.
IF DE YOU KNOW, DEPENDING ON WHAT STAFF STAFFS HAVE THIS PRESENTATION.
SO I HAVE CERTAIN ASSUMPTIONS ABOUT WHAT STAFF THINKS, BUT I WOULD LIKE TO HEAR IT.
I WAS JUST GONNA WAIT, BUT THIS IS FINE, SHERRY.
UM, SO YOU, YOU'RE ASKING ABOUT WHETHER OR NOT WE INCORPORATE E S G PRINCIPLES? YES.
SO, UM, I'M, I'M OKAY EITHER WAY.
I WAS ONE OF THE, THE ONES THAT I WAS LIKE A LITTLE HESITANT UNTIL, UM, TALKING WITH P F M UM, STAFF AND FINDING OUT, OKAY, WELL THIS REALLY ISN'T GOING TO IMPACT OUR YIELDS, UM, WITH ANY SORT OF, UH, SIGNIFICANCE.
SO, SO I'M OKAY WITH GOING DOWN THAT PATH, UM, RELYING ON THEM, NOT ME.
'CAUSE I DON'T HAVE THE TIME TO DO THAT KIND OF MANAGEMENT LEVEL, WHY YOU DON'T, BUT
UM, BUT, UM, YEAH, SO THEY, THEY HAVE BASICALLY, UM, TAKEN AWAY MY CONCERNS 'CAUSE I DID HAVE CONCERNS ABOUT GOING DOWN THIS TYPE OF APPROACH, BUT THEY, THEY'VE BEEN ABLE TO MITIGATE THAT.
SO IF THIS IS SOMETHING THAT COUNCIL WANTS TO PURSUE, UM, I, I'M FINE WITH IT.
KAREN, YOU HAVE SOMETHING TO ADD? SURE.
UM, SO I HAD SOME OF THE SAME CONCERNS THAT SHERRY DID, I THINK IN, IN TERMS OF THE, THE YIELD OR LESSER YIELD.
THIS IS KINDA SATISFY MY CONCERN ABOUT THAT.
I DO STILL HAVE A FEW OTHERS THAT I WOULD JUST POSIT TO, TO COUNSEL AS YOU THINK ABOUT THIS.
SO ON PAGE 18 OF THE SLIDE DECK WHERE IT WAS THE QUESTION OF WHAT DO INVESTORS IMPLEMENT AN AS E S G INVESTMENT OR WHY, WHY DO INVESTORS IMPLEMENT E S G? AND THE FIRST CRITERIA WAS ALIGNMENT OF
[01:10:01]
OBJECTIVES WITH VALUES.ADOPTION OF E S G INITIATIVES ALLOWS INVESTORS TO ALIGN INVESTMENT OBJECTIVES WITH VALUES, IN OUR CASE VALUES OF THE COMMUNITY.
AND I THINK THAT ON THE ENVIRONMENTAL SIDE OF THINGS, WE'VE DONE A VERY EXTENSIVE JOB OF GOING OUT TO THE COMMUNITY AND ASKING THEM IN, AS WE PUT TOGETHER A CLIMATE ACTION PLAN, UM, A MUNICIPAL SUSTAINABILITY PLAN, EVEN MANY OF THE THINGS THAT ARE CAPTURED IN OUR COMMUNITY PLAN SPEAK TO ENVIRONMENTAL STEWARDSHIP AND ENVIRONMENTAL SUSTAINABILITY.
WHAT WE HAVEN'T DONE IS GONE OUT AND DONE ANY KIND OF VETTING IN TERMS OF SOCIAL VALUES.
RIGHT? MAYBE THERE ARE SOME THINGS THAT ARE JUST EXPLICIT, RIGHT.
THAT ARE ABHORRENT TO EVERYONE.
BUT I'M LOOKING AT PAGE 53 OF THE SLIDE DECK, WHICH IS PAGE 64 OF THE PACKET WHERE IT TALKS ABOUT BUSINESS ACTIVITY SCREENING CAPABILITIES.
AND I WOULD BET IF YOU ASKED A HUNDRED RESIDENTS OR OTHER STAKEHOLDERS IN OUR COMMUNITY, OR EVEN THE SEVEN OF YOU
MAYBE NOT EVEN ON MOST OF THEM.
SO WHERE, WHERE DO YOU MAKE THOSE DECISIONS, PARTICULARLY, YOU KNOW, ON, ON THE SOCIAL AND GOVERNANCE SIDE, UH, BUT EVEN, YOU KNOW, ON WHAT KINDS OF BUSINESSES YOU'RE WILLING TO INVEST IN OR NOT.
IT SOUNDS LIKE, UM, P F M HAS ALREADY ESTABLISHED SOME CRITERIA AS A, AS A FIRM MM-HMM.
WHICH I THINK IS ALREADY GONNA BE USEFUL EVEN IF WE DON'T EMBRACE THE E S G SIDE, OR MAYBE IF WE EMBRACE, UH, PIECES OF THAT OR, OR, OR MAYBE STICK MORE TO THE ENVIRONMENTAL SIDE OF THAT.
SO KAREN, TO PARAPHRASE YOU, OR WHAT I HEARD WAS YOU FEEL FAIRLY COMFORTABLE GOING DOWN AN E PATH, NOT AN E S G PATH, I A PATH.
I'M JUST TRYING TO BE, I'M TRYING TO BE EXPLICIT BECAUSE THAT'S HOW I WORK BEST IS SAYING YOU FEEL CONFIDENT THAT ENERGY OBJECTION, UH, VALUES FOR THE COMMUNITY HAVE BEEN ESTABLISHED AND OR FAIRLY ESTABLISHED.
AND THAT OBJECT VALUES FOR THE OTHER TWO HAVE NOT BEEN.
SO IS THAT, AND THAT I, I TAKE FROM THAT A KIND OF RECOMMENDATION.
I'VE BEEN IMPLICIT RECOMMENDATION THAT IF WE GO DOWN THIS PATH, WE, WE DO IT WITH THE ENERGY SEC SECTION OF, OF, OF OUR EXCLUSIONS AS OPPOSED TO ENVIRONMENTAL, NOT ENERGY.
I MEAN, I MEANT ENVIRONMENTAL.
AS OPPOSED TO GOVERNANCE AND SOCIAL, IT SEEMS LIKE THOSE ARE LESS SUBJECTIVE AND LESS AMBIGUOUS.
AND AND WE DO KNOW WE CAN SPEAK VERY CLEARLY TO THE ENGAGEMENT MM-HMM.
YOU KNOW? SO, KAREN, IT WAS MENTIONED HERE A FEW MINUTES AGO THAT HANDGUNS SMALL GUNS THAT WAS MENTIONED.
I'M NOT GONNA MENTION ANYTHING ABOUT THE COUNCIL'S OPINION, BUT I BET YOU TOOK THAT SAME SCENARIO AND WENT DOWN IN THE MIDDLE OF THE STREET AND HAD MEETINGS, PUBLIC MEETINGS, AND SAID, ESPECIALLY IN A, IN A GUN RIGHTS STATE, HOW DOES ANYONE FEEL? WE WOULD GET A BIG OUTPOURING ON EITHER SIDE.
SO I THINK THAT IF WE WENT ON DOWN THAT PATH FOR SUCH A TOPIC, IT WOULD REALLY COME, COME BACK, UH, AND POSSIBLY RIGHTFULLY SO, TO, TO REALLY BITE US.
SO, UM, THAT'S BEEN WHAT'S MY CONCERN AFTER READING THE, THE PACKET.
I, I AGREE WITH THE VICE AND WITH YOU, KAREN, ABOUT THIS, THE ENVIRONMENTAL STUFF THAT'S CUT AND DRY.
WE'VE ALREADY MADE OUR COMMENTS AND, AND OPINIONS KNOWN TO THE, YOU KNOW, PUBLIC, BUT THESE OTHER THINGS WE HAVEN'T.
KATHY, SO ON, ON THE SLIDE, UM, 53 PACKET PAGE.
SO I WOULD STOP ON THE SCREEN.
UM, THESE ARE ALL LIKE THE NO LIST LIKE THAT YOU HAVE, RIGHT? BUT WHAT ABOUT A, A YES LIST, BECAUSE WHERE WE DO HAVE POLICIES ARE IN THINGS LIKE HOUSING AND TRYING TO SUPPORT HOUSING DEVELOPMENT.
[01:15:01]
BUT I DON'T SEE, LIKE, HOW WOULD THAT BE WHEN YOU'RE LOOKING AT PLACES FOR INVESTMENT? ARE THE PLACES TO PROACTIVELY INVEST ALSO CONSIDERED? OR IS IT ONLY WHERE YOU WANNA RESTRICT AND NOT BE INVESTING? 'CAUSE THAT'S, I THINK, A MISSING COMPONENT PERHAPS.SO THE WAY WE VIEW E S G AND HOW WE'VE DEFINED IT IS MORE OF A RISK MANAGEMENT, UH, FROM THAT PERSPECTIVE.
SO, UH, IT, IT'S MORE OF A TAKING AWAY WHAT THEY'RE DOING BAD VERSUS KIND OF REWARDING WHAT THEY'RE DOING.
AND, UH, WE HAVEN'T DEVELOPED, UM, A, A SHORT TERM, UH, SOLUTION FOR MORE OF AN IMPACT SOLUTION, WHICH IS WHAT YOU'RE DEFINING.
WE DO HAVE THOSE OPTIONS AVAILABLE FOR LONGER TERM INVESTMENTS, BUT BASED ON YOUR, UM, UH, CASH FLOWS HERE, WE DON'T BELIEVE THAT THAT WOULD BE, UH, RECOMMENDED.
SO I'M LOOKING AT THIS CANNABIS, IT'S A, IT'S A, RIGHT NOW IN THE STATE, IF WE WERE TO GO AGAINST THAT, IT WOULD BE GOING THROUGH, SO AM I READING THIS, THIS, RIGHT? IT'S, THIS IS ANY ORGANIZATION, A COMPANY THAT IS AGAINST CANNABIS, AGAINST CONTRACEPTIVE? SO THESE ARE JUST THE OPTIONS YOU CAN CHOOSE FROM.
THIS ISN'T WHAT WE'RE APPLYING ACROSS THE BOARD.
THIS IS WHAT YOU CAN PICK TO EXCLUDE.
AND I WASN'T SUGGESTING THAT E S G MEANS THAT YOU CAN'T INVEST IN ALL ANY OF THESE THINGS OR MM-HMM.
THEN WE WE'RE MAKING JUDGMENT CALLS ON BEHALF OF AN ENTIRE COMMUNITY THAT, AND WE HAVEN'T ASKED THEM YET.
ANYTHING ELSE? SO IT'S OUR OWN VALUES VERSUS THE COMMUNITY'S VALUES.
THE SEVEN OF YOU INDIVIDUALLY CERTAINLY HAVE YOUR OWN VALUES.
I'M JUST SAYING, TYPICALLY WHEN WE MAKE POLICY DECISIONS AS AN ORGANIZATION, IT IS AFTER WE'VE TAKEN THE TIME TO VET THOSE DECISIONS, OPTIONS, UM, WITH THE COMMUNITY.
'CAUSE WE REPRESENT THE COMMUNITY AND WE JUST HAVEN'T DONE THAT YET.
BRIAN, YOU HAD A COMMENT? WELL, ARE WE STILL IN QUESTIONS OR ARE WE QUESTIONS? OKAY.
SO I'VE HAD MY QUESTIONS ANSWERED.
I'M LOOKING FORWARD TO PUBLIC FORUM, IF ANYONE, AND, UH, IN DISCUSSION AT THIS POINT.
BUT THAT'S JUST ME AN OBSERVATION.
WE JUMPED AHEAD WITH THIS DISCUSSION, AND WE WEREN'T THROUGH THE PRESENTATION.
WE'RE, UH, WE'RE LIKE 10 SLIDES AHEAD OF WHERE, OR MAYBE NOT SIX SLIDES AHEAD OF WHERE YOU WERE.
SO DO YOU, DO YOU WANNA GO BACK AND CONTINUE ON? BECAUSE I THINK WE WERE NO, WE HAVE ONE PAGE LEFT.
YOU KNOW, I THINK THAT THIS WAS REALLY THE LAST PAGE WE HAD.
ONE MORE, THIS IS JUST THE APPENDIX.
THIS IS ADDITIONAL ITEMS IN CASE THERE WERE ANY SPECIFIC QUESTIONS, WHICH WAS GREAT.
YOU KNOW, WE WERE ABLE TO JUMP TO THAT.
BUT OVERALL, WE HAD ONE LAST PAGE.
UM, WE KIND OF SPOKE TO THAT AND THAT WAS REALLY JUST, COULD YOU GIVE US THAT PAGE NUMBER PLEASE? UH, 41.
HELL, AND THIS JUST SHOWS THE PROPOSED FEES, UM, WHETHER WE WERE TO INCLUDE E S G OR NOT, INCLUDE E S G OVERALL, UM, IS IT, THERE WOULDN'T BE AN IMPACT TO THE FEE.
SO IT WOULD BE ABOUT 10 BASIS POINTS, GIVE OR TAKE.
AND THEN WE SHOW THAT ON A TIERED BASIS, UM, WITH ANY ADDITIONAL ASSETS THAT ARE A ADDED.
AND THAT IS AN ACTIVELY MANAGED PORTFOLIO.
ONE OF THE THINGS THAT WE DID DISCUSS AS WELL WITH, UH, SHERRY AND HER TEAM IS MEETING ON A QUARTERLY BASIS, OH, DOING A, A FULL REVIEW OF THE OVERALL PERFORMANCE AND ALSO OFFERED TO COME MEET WITH YOU ALL, WHETHER IT WAS ONCE OR TWICE A YEAR, JUST TO GIVE AN OVERALL UPDATE ON HOW THE PORTFOLIO HAS DONE, HOW IT'S PERFORMING, ANY OF THOSE MAJOR CHANGES OR ANY RECOMMENDATIONS THAT WE WOULD HAVE.
MELISSA, YOU MAY HAVE ALREADY ANSWERED THIS AND I MISSED IT.
UM, HOW ACTIVE DO YOU ACTIVELY WATCH WHAT'S HAPPENING, ESPECIALLY IN THE E S G SECTOR? BECAUSE WHILE YOU HAVE RELATIVELY CLOSE BASIS POINT BE PERFORMANCE, MY EXPERIENCE IN E S G IS THEY TEND TO SOMETIMES UNDERPERFORM, UM, THOSE FUNDS, THOSE INDEXES.
AND NOW I'M NOT DOING THE SAFE THING THAT THE CITY'S GONNA DO.
BUT, UM, HOW CLOSELY DO YOU MONITOR THEM FOR PERFORMANCE TO SEE WHETHER OR NOT, UH, YOU KNOW, LET'S, LET'S TAKE THE APPLE EXAMPLE, AND I DON'T MEAN THIS IN ANY PROPHETIC WAY, I HOPE, BUT SOMEBODY SAYS, YOU KNOW, WOW, THE WAY THEY, THEY'RE MANUFACTURING CHICK CHIPS, THERE'S CHILD LABOR INVOLVED AND IT'S REALLY HORRIBLE AND IT'S, IT'S TERRIBLE THING, WHICH IS A SUPPLY CHAIN PROBLEM, RIGHT? UM, AND IT CHANGES THE VALUE OF THE,
[01:20:01]
OF THAT ELEMENT IN YOUR FUND, IN YOUR INDEX, UM, THAT COULD BE FAIRLY RAPID IN ITS CHANGE.SO HOW YOU DIDN'T, YOU'RE NOT DOING THAT QUARTERLY.
SO, UM, I ASSUME SO THAT'S KIND OF WHAT I'M ASKING.
ARE YOU DOING THAT QUARTERLY, OR ARE YOU, UH, MORE ACTIVELY MANAGING? UM, 'CAUSE E S G IS, IS GONNA FLUCTUATE MORE ACCORDING TO WHAT'S GOING ON IN THE WORLD.
SO ANY CHANGES THAT OCCUR TO A RISK RATING IN THE MIDDLE OF THE MONTH ARE GONNA BE REFLECTED, UH, ON THAT MONTH END.
THAT IS ALL WE HAVE, UM, PETE, SO WE WELCOME ANY ADDITIONAL QUESTIONS AS WELL.
WHO'S ON? I THINK HE'S, HE'S COMPILING A WHOLE LOT OF QUESTIONS, AND I COULD BE, WE'LL BE HERE TILL FOR A WHILE, BUT GO AHEAD, PETE.
WE'VE SPENT LOTS OF GREAT DISCUSSION, LOTS OF GOOD QUESTIONS BY MY FELLOW COUNSELORS ALREADY.
I, I HAD A VERY BASIC QUESTION.
I, I JUST DIDN'T KNOW WHERE TO GO BACK AND LOOK, SHERRY, MAYBE IT'S TO YOU.
DOES, UH, P MA'AM HAVE A FIDUCIARY, UH, DUTY WITH US OR NOT? YES, YES, YES.
DID YOU HAVE A QUESTION? I DO.
WE WENT THROUGH THIS, UH, VERY QUICKLY, THIS PROPOSED FEE.
SO I JUST WANNA UNDERSTAND, ARE YOU, YOU'RE SAYING THAT YOUR MINIMUM MANUAL FEE IS $40,000.
THE FIRST A HUNDRED MILLION, YOU WOULD HAVE 10.1%, RIGHT? IS THIS FOR, IS THIS FOR A CUSTOMIZED PORTFOLIO OR IS THIS JUST YOUR REGULAR FEE? SO IN OTHER WORDS, WOULD WE BE PAYING ADDITIONAL FEES IF WE WENT DOWN AN E S G PATH? GREAT QUESTION.
SO THIS 10 BASIS POINT FEE COVERS A CUSTOMIZED PORTFOLIO, AND IT, WHETHER THE PORTFOLIO WOULD ADDITIONALLY INCLUDE E S G OR NOT INCLUDE E S G, DOESN'T MATTER.
OR EVEN FOR AN EXAMPLE, UM, YOU KNOW, AS WE ACTIVELY MANAGE THE PORTFOLIO, WE LOOK TO REBALANCE IT ON A MONTHLY BASIS, MAKING SURE THAT WE'RE MAINTAINING DURATION, LOOKING AT ANY ADDITIONAL ISSUERS.
DO WE NEED TO REINVEST? IS IT TIME FOR SOME MATURITIES? THERE AREN'T ADDITIONAL FEES FOR THOSE IN BETWEEN EITHER.
IT'S A FLAT FEE ACROSS THE BOARD.
OKAY, SO WE'VE DONE QUESTIONS.
DO WE WANNA HEAR FROM THE AUDIENCE FIRST? I WAS GETTING THERE.
SO, UH, YOU HAVE NO COMMENTS, NO QUESTIONS.
IF ANYBODY WISHES TO MAKE A COMMENT, UH, ANY COMMENTS NOW WOULD BE THE TIME.
WE'LL OPEN UP THE PUBLIC COMMENT SESSION, SEEING NOBODY'S HAND RAISED.
WE HAVE THREE PEOPLE IN THE AUDIENCE, WHICH IS NICE, BUT, OKAY.
SO THEN WE'LL CLOSE THE PUBLIC COMMENT PERIOD.
WE'LL MOVE FORWARD AND GO WITH OUR COMMENTS.
YOU WANNA START, PETE, WOULD YOU LIKE TO START WITH THE COMMENTS? SURE.
I APPRECIATE THE PRESENTATION THING.
I HAVEN'T SAT THROUGH A, UH, E S G INVESTMENT PRESENTATION IN A WHILE, AND IT LOOKS LIKE THE TOOLS ARE CERTAINLY INCREASING IN SOPHISTICATION FROM ANYTHING I HAVE LAST SEEN, SO I APPRECIATE THAT.
I DO THINK THOUGH, THAT CA COUNCILOR KINSELLA ASKED A, A, A QUESTION THAT, YOU KNOW, SHE COULDN'T QUITE UNDERSTAND WHY APPLE, UH, WAS LOWER ON THE ENVIRONMENTAL CONTRIBUTION THAN THREE M.
AND I THINK THAT EXACTLY GETS TO THE POINT THAT THIS AREA GETS SO SQUISHY THAT I'M NOT SURE WE'D EVER AGREED TO UNDERSTAND AND, AND, AND APPRECIATE ANY TOOL HOW IT WOULD RANK, UH, IN ANY WAY.
SO THAT WILL ALWAYS BE AN ELEMENT OF, OF HAVING TO THINK ABOUT THIS AND WHETHER WE SORT OF AGREE AND UNDERSTAND AND, AND WITH THE TOOLS, WHAT I THINK ABOUT INVESTING, YOU KNOW, I CERTAINLY THINK ABOUT IT OFTEN WITH MY PERSONAL HAT ON AND, AND WHAT I WOULD DO FOR WHAT STRATEGY I MIGHT USE FOR MY OWN STYLE.
BUT WHEN I PUT ON MY ELECTED OFFICIAL HAT, IT GETS WAY MORE CONSERVATIVE.
AND, AND I APPRECIATE IN OUR, IN OUR INVESTMENT POLICY THAT WE DO TALK ABOUT SAFETY, LIQUIDITY, AND
[01:25:01]
OPTIMAL YIELD.AND I THINK THAT'S ACTUALLY THE RIGHT, UH, ORGAN, UH, THAT THAT WOULD EVEN BE THE RIGHT PRIORITY OF THOSE OF THOSE PHRASES.
SO, YOU KNOW, A QUESTION FOR US GOING FORWARD IS, DO WE WANNA ADD AN E S G ELEMENT INTO OUR INVESTMENT POLICY OBJECTIVES? AND IF WE DID, IT WOULD BE, YOU KNOW, IN MY OPINION, A FAR FORTH, UH, THAN THE OTHER, UH, THE OTHER MEASURES THAT WE USE.
AND SO, AND, AND I DEFINITELY APPRECIATED, UH, OUR CITY MANAGERS, UH, POINTING OUT THAT, YOU KNOW, THERE'S LOTS OF ELEMENTS HERE IN E S G INVESTING THAT WE HAVEN'T REALLY HAD A CONVERSATION WITH OUR COMMUNITY.
SO IT'S NOT CLEAR TO ME THAT NOW IS, IS THE RIGHT TIME.
UH, I'M GLAD THAT P F M IS IS HERE WITH A FIDUCIARY OBLIGATION TO US.
I THINK THAT'S, YOU KNOW, A, A A WONDERFUL THING TO HELP OUR, UH, TO HELP OUR FINANCIAL FOLKS THINK THROUGH WHAT TO DO WITH THE MONEY THAT WE GIVE THEM.
BUT I ALSO THINK THAT WE CONTINUE TO BE VERY CONSERVATIVE IN OUR STRATEGY.
'CAUSE IT'S A, IT'S NOT OUR MONEY, IT'S OTHER PEOPLE'S MONEY.
AND WE HAVE TO, WE HAVE A DUTY, UH, IN MY OPINION, ABOUT HOW WE TREAT THAT MONEY.
SO JUST LOOKING THROUGH MY NOTES, PLEASE.
YEAH, I, I, I THINK THAT'S, I THINK THAT'S MY COMMENTS FOR NOW, MAYOR.
SO FIRST OFF, UH, ANNETTE AND SARAH, THANK YOU BOTH FOR BEING HERE TODAY.
I DIDN'T, UH, THANK YOU YET, SO THANK YOU FOR A PROFESSIONAL PRESENTATION THOROUGH, UH, ANSWERING ALL OF OUR QUESTIONS.
SO THANK YOU FOR, FOR ALL OF THAT.
UM, MY THOUGHTS, UM, YOU KNOW WHAT, UH, KAREN SHARED ABOUT THE FACT THAT WE DON'T HAVE INPUT ABOUT THE SS AND THE G UH, VERY MUCH TAKES THOSE OFF THE, THE TABLE FROM, FOR ME, BY MY THINKING.
UM, AND SO THE TIMING'S NOT RIGHT.
AS COUNCILOR FURMAN MENTIONED THE, UM, THE ENVIRONMENT PIECE, I, I'M ACTUALLY UNCOMFORTABLE WITH THAT BECAUSE AS THIS BODY HAS NOTED DURING THE PRESENTATION, THERE'S DISCREPANCIES ABOUT HOW ENVIRONMENT IS IN FACT CONSIDERED.
AND, UM, YOU KNOW, AGAIN, NOT CASTING ANY ASPERSIONS YOUR WAY, THE FACT THAT, YOU KNOW, APPLE HAS THIS SHINING, UH, ECORE MAKES ZERO SENSE TO ME, AND I REALLY HAVE A HARD TIME WITH THAT.
AND AT THE SAME TIME, UH, MR. SHALI WROTE A VERY, UH, WELL, UH, THOUGHT OUT, UH, LETTER TO THE EDITOR THAT WAS PRINTED THIS PAST FRIDAY.
I READ THAT, UM, I THOUGHT ABOUT THAT A GOOD BIT OVER THE WEEKEND, IN FACT.
UM, AND YOU KNOW, AS IT RELATES TO THE, THE ENVIRONMENT PIECE, YOU KNOW, OUR CITY'S, UH, SUSTAINABILITY PLAN, THE, THE MUNICIPAL PLAN THAT SAYS, YOU KNOW, HEY, WE SHOULD BE WORKING WITH VENDORS THAT ARE, UH, YOU KNOW, ENVIRONMENTALLY SOUND AND WHATNOT.
UM, BUT THAT TO ME IS SORT OF LIKE A TIER ONE VENDOR.
SO P F M IS OUR TIER ONE VENDOR AND WHO THEY WOULD BE INVESTING IN ON OUR BEHALF GETS INTO WHAT I WOULD CONSIDER TIER 2, 3, 4, ET CETERA.
AND WHERE I'M GOING WITH THIS IS, IS THAT IF WE KEEP PEELING THE LAYERS BACK, WE WON'T DO BUSINESS WITH ANYBODY.
YOU KNOW? SO, YOU KNOW, P F M I HOPE YOU GUYS HAVE TURNED IN YOUR INCANDESCENT LIGHT BULBS AND ARE ONLY USING, YOU KNOW, LEDS READY TO BEAT YOU UP OVER THAT IF YOU'RE NOT RIGHT.
UM, THAT'S WHERE I THINK THAT OUR, UM, PROCUREMENT POLICY KIND OF NEEDS TO STOP ON, ON THIS, UH, PARTICULAR COMPONENT.
THE, ONE OF THE THINGS THAT CERTAINLY HAS WEIGHED ON ME IS THAT AS A BODY, AND REALLY AS A TOWN, WE'VE DONE A GREAT JOB OF BEING APOLITICAL ABOUT SO MANY DIFFERENT ISSUES.
AND EVEN THOUGH THERE'S BEEN RESISTANCE AT TIMES TO ENVIRONMENTAL, UH, UM, INITIATIVES, UH, YOU KNOW, WE CONTINUE TO MOVE FORWARD.
AND I'M GLAD THAT WE'RE DOING THAT.
BUT I THINK THAT ALL OF A SUDDEN SAYING THAT THE E MATTERS IN OUR CITY'S INVESTMENT OPENS THE DOOR FOR, UH, DISCOURSE THAT WILL NOT BE BENEFICIAL TO HARMONY IN THE COMMUNITY.
THE, UM, NEXT THOUGHT THAT I HAVE IS, IS THAT, AND THIS IS NO INDICTMENT OF ANYONE OR THE BODY IN TOTAL UP HERE, BUT OUR QUESTIONS TODAY REALLY MAKE ME QUESTION WHETHER WE'RE QUALIFIED TO GO THROUGH A PROCESS OF SAYING YAY OR NAY TO THIS SECTOR, OR THIS,
[01:30:01]
UH, SUBCATEGORY SUB-INDUSTRY, SORRY.LIKE, I, I DON'T WANT TO DO THAT, YOU KNOW, AND I THINK I'M A PRETTY SAVVY PERSON AND I DON'T FEEL LIKE I SHOULD BE DOING THAT.
AND I DON'T THINK THAT WE, AS A COUNCIL, I THINK WE NEED TO STAY IN OUR LANE.
AND, UM, YOU KNOW, US CHOOSING WHAT'S IN OR OUT OF AN INVESTMENT POLICY, I THINK IS WAY OUT OF OUR LANE.
SO I THINK FOR THE MOMENT, MAYOR, THAT IS MY THOUGHTS.
SO FIRST OF ALL, I ASKED MY FELLOW COUNSELORS, I'VE SAID, THANK YOU VERY MUCH FOR COMING AND DOING THIS PRESENTATION.
UM, AND YOU'VE MADE IT ALMOST UNDERSTANDABLE.
AND WHILE MY PERSONAL, AS I MENTIONED IN MY PERSONAL PORTFOLIO, I THINK E S G IS IMPORTANT TO ME PERSONALLY.
AGAIN, I HAVE A FIDUCIARY RESPONSIBILITY TO THE COMMUNITY AS A WHOLE, UM, AS A MEMBER OF THIS COUNCIL.
AND, UM, I, I LIKE SOME OF MY FELLOW COUNSELORS, PROBABLY NOT ALL OF THEM, DON'T FEEL THAT I'M QUALIFIED TO SPEAK ON BEHALF OF THE ENTIRE COMMUNITY WHEN IT COMES TO, TO MAKING CHOICES AND DECISIONS ABOUT WHAT SHOULD BE DONE, UM, AT THIS POINT IN TIME.
NOW, IF THIS IS SOMETHING THAT WE FEEL AS A, AS A GOVERNING BODY, UM, ELECTED OFFICIAL BODY THAT WE WANNA TAKE TO THE COMMUNITY AND, AND TRY AND FIND OUT WHAT THE CONSENSUS IS AROUND SOME OF THESE SUB-INDUSTRIES AND EXCLUSIONARY CATEGORIES, UM, I THINK THAT'S A DIFFERENT CONVERSATION.
AND, UM, SO I GUESS I JUST FEEL LIKE IT'S VERY EASY TO MIX YOUR PERSONAL BELIEFS IN WITH WHAT YOU THINK THE COMMUNITY IS INTERESTED IN DOING.
AND, UM, I DON'T THINK THAT AT THIS POINT IN TIME I'M QUALIFIED TO SAY WHAT WE SHOULD AND SHOULDN'T DO, EXCEPT TO SAY WE NEED TO MAXIMIZE THE YIELD, UM, FOR THE COMMUNITY, BECAUSE THAT'S WHAT WE SAID WE WERE GOING TO DO, IS MAKE SURE THAT OUR COMMUNITY STAYS STRONG FINANCIALLY AND CAN WEATHER WHATEVER STORMS HAPPEN.
THIS IS A LOT OF INFORMATION TO DIGEST ON THE FIRST READ FACT, AS I WAS READING IT IN ADVANCE OF THIS MEETING, I WAS HAPPY THAT YOU WERE GONNA BE HERE TO EXPLAIN IT.
UH, I WANNA GO IN A LITTLE BIT OF A DIFFERENT DIRECTION, AND THAT HAS TO DO WITH WELLS FARGO, WHO'S OUR BANK.
AND I WOULD LIKE TO KNOW WHERE THEY STAND.
AS I MENTIONED BEFORE, WITH OTHER BANKS THAT WE COULD HAVE ACCESS TO.
I MEAN, IF THEY'RE THE WORST OF THE WORST AND THERE'S BANKS THAT ARE EQUAL TO THEM IN SIZE AND DIVERSITY AND GLOBAL GLOBALIZATION AND ALL THE DIFFERENT FACTORS ABOUT WHAT A BIG BANK CAN GIVE AND SAFETY, I WOULD LIKE US TO HAVE A CONVERSATION ABOUT THAT AT A LATER POINT.
BUT I DON'T HAVE ENOUGH INFORMATION.
I HAVE MY OWN BELIEFS, BUT THAT'S NOT DATA DRIVEN
SO I, I, TO ME, THAT'S A DIFFERENT CONVERSATION THAN OUR INVESTMENT PORTFOLIO BECAUSE WE'RE NOT INVESTING IN WELLS FARGO, IT'S WHERE WE HAVE OUR CHECKING ACCOUNTS, RIGHT.
SO I FEEL LIKE, UM, WE MIGHT BE QUALIFIED TO MAKE THAT DECISION BASED ON INFORMATION YOU PROVIDE TO US, WHICH WE DON'T HAVE IN FRONT OF US IN TERMS OF OUR PORTFOLIO.
I, UH, WE'RE TALKING ABOUT A SMALL PORTION OF OUR ASSETS IN, WHAT WAS IT, 20 AND 2040 LESS THAN LESS THAN 50 PER 40%, SOMETHING LIKE THAT.
CURRENTLY INVESTED A BIT LONGER TERM, THOSE FEDERAL AGENCIES.
NO, I WAS THINKING ABOUT THE, THE, THE CREDIT AND THE BONDS WASN'T THAT 26%, IF I'M NOT MISTAKEN.
AND THAT'S ONE WHERE WE HAVE NO CONTROL OVER THAT WE'RE JUST PICKING AMONGST A NUMBER OF DIFFERENT OPTIONS FROM A POOL.
AND YOU DON'T HAVE ANY, YOU'RE NOT MAKING ANY DECISIONS IN THAT POOL EITHER.
SO MIKE, SO IT'S, IT'S A COMMON END QUESTION.
IF WE MOVED AWAY FROM THAT POOL, THEN YOU COULD CHOOSE FOR US OTHER INVESTMENTS, AND THEN WE WOULD BE ABLE TO KNOW WHERE ALL THAT MONEY IS AT ANY PARTICULAR POINT IN TIME.
[01:35:01]
THAT BEEN DISCUSSED? WELL, THAT'S PART OF WHY WE WANTED TO HAVE PROFESSIONAL INVESTMENT ADVISORS INSTEAD OF JUST RELYING ON THE L G I P POOL.UM, SO YOUR THINKING IS THAT WE MAY MOVE AWAY FROM THAT.
AND SO IN THE BEGINNING PART OF THE PRESENTATION, BEFORE WE EVEN STARTED TALKING ABOUT E SG MM-HMM.
AND SO IS THAT A DECISION YOU'RE ASKING COUNSEL TO MAKE? OR IS THAT A DECISION YOU'RE MAKING WITH OUR ADVISORS? I, I'M, I'M NOT ASKING COUNSEL TO MAKE A DECISION ON THAT.
I MEAN, IF YOU HAD SOME THOUGHTS THAT YOU'RE LIKE, PLEASE DON'T DO THIS OR THAT, I MEAN, I WOULD LISTEN TO IT, BUT, UM, WE, I, I WOULD RELY PRIMARILY ON THE EXPERTISE OF OUR, OUR PROFESSIONAL INVESTMENT ADVISORS.
SO I, I WOULD LIKE TO SEE, I DON'T KNOW WHAT, WHAT YOU THINK WHEN YOU THINK YOU WOULD BE READY, BUT I'D LIKE TO SEE ANOTHER PRESENTATION IN, I DON'T KNOW, SIX MONTHS WHERE YOU WOULD BE SHOWING US WHAT YOU HAVE DONE AND WHAT IMPACT THAT HAS.
AND THEN BASED ON THAT, BUT BEFORE THAT, I'D LIKE TO SEE THE BANKING INFORMATION.
UH, BUT, BUT BASED ON THAT, MAYBE WE CAN HAVE ANOTHER CONVERSATION.
BUT RIGHT NOW, I, I DON'T FEEL LIKE I HAVE ENOUGH INFORMATION TO MAKE ANY CHANGES AT ALL.
AND I'M COMPLETELY CONFUSED ABOUT THE DEFINITIONS.
AND IT JUST DOESN'T, IT DOESN'T MAKE SENSE TO ME EITHER THAT IT'S INCLUDE THAT SUPPLY CHAIN IS HERE, BUT IT'S NOT THERE WHEN SUPPLY CHAIN IMPACTS ALL THESE CORPORATIONS.
SO THAT, THAT DID NOT MAKE ME FEEL COMFORTABLE WITH THE INDEX THAT'S BEING USED.
SO MAYBE THERE'S SOMETHING ELSE.
AND MAYBE THERE'LL, THERE'LL BE SOMETHING ELSE, UH, THAT DOESN'T FEEL LIKE WE SHOULD BE MAKING ANY CHANGES RIGHT NOW, FROM MY PERSPECTIVE.
'CAUSE I DON'T KNOW WHERE WE WOULD GO.
I MEAN, WE CERTAINLY DON'T WANT SEVERE RISK COMPANIES ANYWAY.
SO IF THEY'RE SEVERE UNDER E S G, ARE THEY NOT SEVERE OR HIGH RISK IN SOME OTHER MEASUREMENT, SOME OTHER, DO YOU KNOW WHAT I'M SAYING? IT'S LIKE, IT FEELS LIKE THEY WOULD, THEY SHOULD BE EXCLUDED ANYWAY FROM YOUR LIST.
BUT WITH SOME OF THOSE CERTAIN EXAMPLES, SOME OF THEM ALREADY ARE.
AND THEN OTHERS, YOU KNOW, WHEN IT COMES TO FINANCIALS THAT INCORPORATES QUITE A FEW.
SO, UM, YOU KNOW, THAT MIGHT BE THINGS LIKE JP MORGAN.
BUT WHAT I WILL SAY, AS AN EXAMPLE, ONE OF THE THINGS THAT WE HAVE DONE, SO FOR INSTANCE, YOU KNOW, BACK TO THAT SIMILAR EXAMPLE OF SILICON VALLEY BANK.
AS A RESULT OF THAT, WHAT WE DID AS A FIRM IS WE PAUSED ANY PURCHASES IN FINANCIALS UNTIL WE REASSESSED NOT ONLY THE SECTOR, BUT ALL OF THE APPROVED ISSUERS ON OUR LIST AND SLOWLY ADDED THEM BACK ONCE WE FELT COMFORTABLE.
SO THERE ARE ACTIONS THAT WE'LL TAKE IF THERE'S SOMETHING, IF THERE'S NEGATIVE NEWS OUT THERE, OR MAYBE THIS DOESN'T ALIGN.
SO BECAUSE OF OUR CREDIT PROCESS, WE WILL APPROVE OR REMOVE ISSUERS.
AND THAT'S SOMETHING THAT WE ALSO DID DURING THE PANDEMIC.
WE ACTUALLY PAUSED ALL OF OUR ISSUERS REASSESSED, AND WE HAD ONLY ADDED BACK ON ABOUT 80%.
THEN WE SLOWLY INCREASED IT UNTIL WE HAD FULLY REVIEWED ALL FUNDAMENTALS.
AND THEN WE HAD A MEETING, UM, QUARTERLY THAT WAS ABOUT A FOUR HOUR INVESTMENT COMMITTEE MEETING ON WHY OR WHY WE DO NOT WANT TO INCLUDE CERTAIN ISSUERS.
SO TO THAT POINT, YOU'RE ABSOLUTELY RIGHT.
IF THERE IS SOME SORT OF IMPACT OR NEWS, THEN WE AS A FIRM, BECAUSE OF OUR CONSERVATIVE APPROACH, BECAUSE WE ARE A FIDUCIARY, WE WILL TAKE THAT EXTRA PRECAUTION UNTIL WE KNOW.
AND THEN THIS WAY WE KNOW THAT WHAT IS IN OUR CLIENT'S PORTFOLIOS, AND WE CAN SPEAK TO THAT AS TO WHY WE FEEL COMFORTABLE OR WHY WE DECIDED TO REMOVE THEM.
'CAUSE YOU KNOW, UH, TREASURIES, FEDERAL AGENCIES, UH, I DON'T KNOW, I WAS GONNA SAY MORTGAGE BACKED MORTGAGE, MORTGAGE-BACKED SECURITIES, BUT THAT, THOSE HAVE HAD THEIR ISSUES TOO THAT A LITTLE BIT.
BUT YES,
AND SO I'M RESISTANT ABOUT CORPORATE TO BEGIN WITH WITHOUT EVEN APPLYING AN E S G FACTOR.
AND YOU KNOW, THEY, EVEN THOSE COMPANIES THAT WE THOUGHT YOU COULD NEVER GO WRONG WITH, I B M USED TO BE SOMETHING IN OUR INDUS, MY INDUSTRY THAT
[01:40:01]
WE WOULD SAY, AND THEN YOU COULD, SO CORPORATES ARE RISKY, EVEN, YOU KNOW, THEY'RE MUCH RISKIER THAN THAN THE OTHERS.AND I NOTICED THAT OUR RETURNS HAVE BEEN NEGATIVE, LIKE IN 22 WAS NEGATIVE.
I'M NOT SURE THAT WAS THAT L G I P FUND, UH, YES.
THAT THAT WOULD BE RELATED TO THE L J P AND THAT IS HOW MUCH THE, THE BASICALLY NET LOSS FOR, UM, THOSE MONTHS WERE MM-HMM.
AND SO, UM, WE KIND OF TALKED ABOUT THIS A WHILE AGO, UM, THAT PROBABLY SOME PEOPLE DON'T REALLY REMEMBER, BUT, UM, THERE'S AN ACCOUNTING RULE YEAH.
THAT SAYS THAT EVEN IF YOU HAVEN'T REALIZED A LOSS ON THE INVESTMENT, YOU HAVE TO STILL RECOGNIZE IT.
AND SO THAT'S WHAT L G I P IS DOING.
AND UM, SO OUR CURRENT ESTIMATE OF HOW MUCH UNREALIZED LOSS WE'RE CARRYING IN THE L G I P IS ABOUT 1.4, ALMOST 1.5 MILLION.
SO IF WE CHOSE TO PULL OUR MONEY OUT OF THERE MM-HMM.
UM, BECAUSE WE WILL BE RECOGNIZING BASED ON HOWEVER MUCH WE TAKE OUT, WE WILL BE RECOGNIZING THAT LOSS.
THEY HAVE DONE THOSE ENTRIES AND IT'S REFLECTING THAT UNREALIZED LOSS.
BUT IF OUR MONEY STAYS IN THERE, IT WILL BE RECOUPED WHEN THE MARKET TURNS AROUND.
WE COULD PULL IT OUT GRADUALLY TOO.
THAT WOULD BE, BECAUSE RIGHT NOW YOU GET 5% YIELD ON A CD WITH ZERO RISK DEPENDING ON HOW MUCH YOU INVEST.
'CAUSE THE GOVERNMENT WILL COVER IT.
IT SEEMS LIKE PRETTY EASY, HIGH YIELD, LOW RISK KIND OF INVESTMENT ON A BANK CD.
THE ONLY ALTERNATIVE WOULD BE THAT THERE WOULD BE LESS LIQUIDITY IF THERE WAS A LIQUIDITY SITUATION THAN THERE WOULD BE.
BUT ABSO YOU ARE ABSOLUTELY RIGHT THAT THAT YIELD IS VERY ADVANTAGEOUS RIGHT NOW EVEN AT SIX MONTHS.
THAT SHORT TERM PART OF THE CURVE HAS ADDED A LOT OF VALUE.
SO AS, EVEN AS WE'RE CUSTOMIZING PORTFOLIOS, WE'RE TAKING ADVANTAGE OF THAT SHORT TERM PART OF THE CURVE, BUT STILL BALANCING THAT OUT A LITTLE BIT LONGER IN THAT TWO TO THREE YEAR DURATION.
BECAUSE AS YIELDS DROP, WE KNOW THAT WE'RE INVESTED OUT LONGER AND COULDN'T HOLD ONTO THAT LONGER THAN WHEN THOSE FRONT YIELDS COME DOWN.
SO WE TRY TO, YOU KNOW, REALLY LOOK AT, OKAY, ACROSS THE YIELD CURVE, WHERE CAN WE BE SELECTIVELY OPPORTUNISTIC AND TAKE ADVANTAGE OF SOME OF THOSE OPPORTUNITIES, HENCE CORPORATE.
AND YES, THERE COULD BE POTENTIALLY CORPORATES IF THAT'S OF OF INTEREST, BUT YES, THERE IS MORE RISK WITH A CORPORATE.
HOWEVER, IN THE CITY'S PORTFOLIO THAT WE WOULD LOOK AT, UM, THERE IS THAT, THAT RISK THAT IS THERE, BUT THOSE ARE SHORTER DURATION CORPORATES AND THOSE TEND TO HAVE A BIT MORE LIQUIDITY IN THE OVERALL MARKET.
SO, YOU KNOW, WE CAN ALWAYS LOOK TO REDEPLOY THAT CASH INTO A GOVERNMENT SECTOR IF THAT'S THE PREFERENCE AS WELL.
KAREN, YOU HAVE SOMETHING TO ADD? YEAH, JUST SO VICE MAYOR HAD ASKED, UM, IF ANNETTE AND SARAH COULD PULL TOGETHER INFORMATION ABOUT HOW THE BIG BANKS ARE RANKING, UM, IN TERMS OF THEIR E S G SCORES.
SO ONE, BEFORE WE GIVE THAT DIRECTION, UH, TO P F M STAFF, I'D LIKE TO KNOW IF THERE IS CONSENSUS AROUND THAT AND IF THERE IS CONSENSUS AROUND THAT, I WOULD LIKE TO JUST GIVE SOME CAUTION AROUND WHAT YOU MIGHT POTENTIALLY DO WITH THAT INFORMATION.
BECAUSE WE JUST LOOKED AT ONE EXAMPLE OF THREE PARTICULAR CORPORATIONS THAT HAD CERTAIN E S G RATINGS BY SUSTAINABLE, THANK YOU.
UM, WHERE THERE WAS NO CONSENSUS AMONG THE COUNCIL ON WHETHER OR NOT THAT WAS EVEN JUSTIFIED OR LEGITIMATE.
AND SO, SO THAT'S ONE CAUTION.
THE OTHER CAUTION IS IF WELLS FARGO IS STILL, YOU KNOW, BEING HELD TO A CERTAIN, UM, POOR SCORE OR THE EVENTS OF 15 YEARS AGO ARE BEING HELD AGAINST THEM STILL, I WOULD ALSO WANT COUNSEL TO CONSIDER OUR EXPERIENCE AS AN INSTITUTION WITH WELLS FARGO, WHICH HAS BEEN PHENOMENAL.
AND WE DON'T HAVE A LOT OF SUPER LONGSTANDING RELATIONSHIPS AS IMPORTANT AS THIS ONE, BUT, BUT WHERE YOU OFTEN HAVE THE VENDOR REST ON THEIR LAURELS, RIGHT? 'CAUSE THEY FIGURE WELL THEY'VE GOT YOU.
AND THAT HAS NOT BEEN THE CASE WHATSOEVER WITH WELLS FARGO.
[01:45:01]
THEIR CUSTOMER SERVICE HAS BEEN OUTSTANDING AND THEIR COMPETITIVENESS IN TERMS OF OUR RECENT BOUNDARY FUNDINGS, UM, AND, AND OTHER DEBT HAS BEEN EXTRAORDINARY.I MEAN, THAT'S WHERE WE'RE GETTING THESE 1%, ONE AND A HALF PERCENT RATES.
SO I JUST WANT TO JUST OFFER THAT, UM, IN CASE YOU'RE THINKING, WELL, LET'S RATE WELLS FARGO BASED ON THE OTHER BANKS AND THEN GIVE DIRECTION TO STAFF MAYBE TO CHANGE BASED ON SOMETHING YOU MIGHT SEE THERE.
IF, IF I COULD ADD TO THAT, THAT WAS ACTUALLY PART OF THE DECISION PACKAGE OF WE HAVE NOT DONE A BANKING SERVICES R F P I DON'T KNOW IF EVER.
AND P F M HA HAS ANOTHER, UH, ELEMENT OF THEIR, THEIR BUSINESS WHERE THEY ASSIST WITH THOSE.
UM, SO THAT WAS SOMETHING THAT WE WANTED TO DO THAT R F P IN CONJUNCTION WITH THE E R P SYSTEM.
SO WE'RE NOT DUPLICATING EFFORTS AND I DON'T KNOW THAT WE WOULD NECESSARILY CHANGE FROM WELLS FARGO, BUT IT IS A GOOD THING TO DO A BANKING SERVICES R F P, MAKE SURE THAT, THAT IF WE DID STAY WITH WELLS FARGO, THEY SHARPENED THEIR PENCILS ON THINGS.
IT'S SOMETHING THAT YOU DO WANT TO DO, UM, FROM TIME TO TIME.
UM, BUT I, I WOULD ECHO WHAT KAREN HAS SAID.
THEY'RE CUSTOMER SERVICES HAS BEEN EXCELLENT.
UM, THE, THEY LOCKED US IN WHEN, WHEN THERE WAS JUST THE FIRST LIKE TALKING OF LIKE RATES COMING DOWN, UM, THEY LOCKED US IN ON OUR EARNINGS RATE ON OUR CHECKING ACCOUNT.
AND I WAS GETTING CALLS FROM THE BROKERS WANTING TO SELL ME CDS AT A LOWER RATE FOR THREE TO FIVE YEARS ON THESE CDS THAN WHAT OUR EARNINGS RATE WAS ON OUR CHECKING ACCOUNT.
AND THEY HAD LOCKED THAT IN FOR US.
AND WHENEVER WE CALL FOR ASSISTANCE ON ANYTHING, ANYTHING, 'CAUSE FINANCE CALLS THEM FOR A VARIETY OF DIFFERENT THINGS, WE GET VERY, VERY QUICK RESPONSE.
LIKE IT WOULD BE SOMETHING THAT I THINK WE WOULD NEED TO LOOK AT LIKE THE SERVICE LEVEL AS OPPOSED TO IF THERE'S SOME OTHER PHILOSOPHICAL THING THAT, THAT COUNCIL WOULD HAVE ABOUT NOT WANTING TO GO WITH WELLS FARGO.
UH, JESSICA, DID YOU WANNA JUST TAKE ON SOMETHING? 'CAUSE YOU'RE GONNA GET YOUR CHANCE IN, WHAT I WANNA DO IS IF I'D LIKE TO GO BACK AND START WITH PETE TO HAVE AN ANSWER TO INCLUDE IN HIS, IN HIS COMMENTS.
WE'RE GOING DOWN, WE'RE GOING DOWN, WE'RE GOING DOWN THE DESK.
IF YOU COULD, KAREN HAS ASKED A NEW QUESTION AND WE'LL GO DOWN THE DAYS AGAIN.
I DON'T WANNA GO START ALL OVER AND THEN, OKAY.
I HAVE A BUNCH OF DISJOINTED THOUGHTS THAT AS I'VE MADE NOTES THAT ARE NOT GOING TO SEGUE WELL TO EACH OTHER.
SO FORGIVE ME, UM, BECAUSE THIS IS, THIS HAS REALLY HELPED ME.
I REALLY WANNA THANK YOU FOR THE PRESENTATION BECAUSE AS I STARTED TO SAY BEFORE, I DIDN'T HAVE A LOT OF VOCABULARY TO START FRAMING SOME OF THIS, BUT YOU'VE, YOU'VE GIVEN ME NOW SOME VERY BASIC FUNDAMENTALS FOR ME TO START FRAMING HOW I'M THINKING ABOUT THIS START IS THE OPERATIVE WORD BECAUSE I'M COMING FROM A POINT OF A LACK OF INFORMATION.
YOU HAVE NOW GIVEN ME SOME BUILDING BLOCKS FOR ME TO REALIZE HOW MUCH MORE I NEED TO LEARN AND, AND AVAIL MYSELF OF INFORMATION OUT THERE.
UM, BECAUSE I DO THINK THAT WE NEED TO START THINKING ABOUT E S G AGAIN, START IS A, IS A, IS AN OPERATIVE WORD HERE.
UM, BECAUSE I DO THINK IT'S PART OF, WE, WE, LIKE WE NEED TO KNOW WHAT THE COMMUNITY THINKS.
WE CAN'T KNOW WHAT A COMMUNITY THINKS ON EVERYTHING BECAUSE SO MANY POINTS ARE SO SPECIFIC THAT IT'S SOMETHING THAT PERSON MAY HAVE THOUGHT ABOUT SOMETHING AND NOT THOUGHT ABOUT HOW SOMETHING ELSE TIES IN, WHICH IS EXACTLY WHAT HAPPENED TO ME IN THIS PRESENTATION.
UM, BUT THAT IS WHAT WE'RE ELECTED TO DO AS WELL, IS TO START, WE ARE REPRESENTATIVE OF THE COMMUNITY AND WE DO TAKE OUR OWN VALUES, WHICH WE CAMPAIGN ON OUR VALUES TO GET THE SUPPORT OF THE PUBLIC IN ORDER TO BE ABLE TO SIT UP HERE AND MAKE HARD DECISIONS.
AND THESE ARE HARD DECISIONS AND I DON'T WANNA JUST KICK THEM THE CAN DOWN THE ROAD SAYING, YOU KNOW, WE CAN'T BECAUSE WE DON'T KNOW HOW THE COMMUNITY THINKS ON EVERYTHING.
AT THE SAME TIME, WE DO NEED SOME FUNDAMENTALS, YOU KNOW, TO PUT THAT INTO PERSPECTIVE FOR US.
SO TO ME, THIS IS THE START OF A PROCESS.
UM, SOMEPLACE WHERE I AM HAVE MORE OF A LEVEL OF COMFORT IS IN THE ENVIRONMENTAL SECTOR.
'CAUSE WE DO HAVE GOOD ANALYTICS AND DATA ON THAT AND PUBLIC MEETINGS AND A RECORD TO POINT TO AND A POLICY, COUPLE OF POLICY STATEMENTS THAT WE HAVE PUT FORTH IN OUR CLIMATE ACTION PLAN.
ALSO IN OUR COMMUNITY PLAN SUSTAINABILITY.
I MEAN, WE HAVE, WE, WE HAVE POLICIES THERE.
SO I DON'T HAVE AS MUCH PAUSE.
I WOULD LIKE TO THINK THAT, YOU KNOW, I HAVE AN UNDERSTANDING OF SOMEWHAT OF WHERE THE COMMUNITY WOULD GO, BUT THE TRUTH OF THE
[01:50:01]
MATTER IS I DON'T ON OTHER BROADER ISSUES.UM, BUT I THINK WE NEED TO, THIS IS THE WAKE UP CALL THAT WE NEED TO START DOING THAT RESEARCH.
HOW IS A HUGE QUESTION WITH ALL THAT WE HAVE ON OUR PLATE AS WELL.
BUT IT IS SOMETHING THAT, AS I SAID, WE JUST CAN'T KICK THAT DOWN THE ROAD.
UM, I, SO AGAIN, I'M MORE COMFORTABLE IN THE E AREA AT THIS POINT.
I THINK WE NEED TO LOOK AT REVISING OUR INVESTMENT POLICY BE BECAUSE, YOU KNOW, BECAUSE AS WAS POINTED OUT HERE TO TALK ABOUT WHAT ARE OUR LIMITS OF RISK EXPOSURE, BECAUSE THAT HAS TO COME FIRST BEFORE WE EVEN TALK ABOUT E S G GENERALLY IS WHAT IS OUR RISK EXPOSURE.
GENERALLY WE NEED TO TALK ABOUT THAT.
OUR FEELINGS ON THE FOSSIL FUEL INDUSTRY, I THINK ARE MORE CLEAR BASED ON OUR OTHER, UM, DOCUMENTS.
UM, THE OTHER INDUSTRY EXCLUSIONS.
WE NEED TO START THINKING ABOUT HOW THEY WILL FACTOR IN.
UM, I WANTED TO MAKE A COUPLE MORE POINTS.
THE CUSTOMER SERVICE PILLAR THAT I BROUGHT UP BEFORE ABOUT, AND NOW WE JUST TALKED ABOUT IT IN TERMS OF OUR BANKING, BUT THAT'S NOT ADDRESSED IN OUR POLICY.
AGAIN, IT'S ABOUT, YOU KNOW, SAFETY, LIQUIDITY AND YIELD.
AND I THINK THAT THE CUSTOMER SERVICE COMPONENT IS IMPORTANT.
UM, AND, AND WHERE DO WE GET THAT, WHETHER WE'RE TALKING ABOUT THE INDIVIDUAL BANKING OR AS IT WAS POINTED OUT, IT WOULD BE WITH LAY WITH YOU GUYS.
BUT WHAT'S THE CUSTOMER SERVICE BEING GIVEN TO YOU FROM WHERE THE INVESTMENT IS ACTUALLY HAPPENING? YOU KNOW, AGAIN, IT'S A DRILL DOWN.
UM, AND THE OTHER QUESTION THAT I HAD IN TRYING TO WRAP MY MIND AROUND THIS IS THE IMPACT ON WHEN WE BOND.
AND WE TOUCHED ON THAT A LITTLE BIT AND I THINK I HAVE MORE OF AN UNDERSTANDING.
AND AGAIN, IT'S A BIGGER CONVERSATION.
'CAUSE WE WERE TALKING ABOUT THAT WITH THE, NOT JUST THE, NOT JUST THE, UH, WELLS FARGO, BUT WHEN WE'VE BONDED FOR THINGS LIKE, UM, YOU KNOW, TRUCKS, UH, AND, AND CAPITAL PROJECTS AND THAT ARE COMING IN OR LEASED TO PURCHASE THINGS.
I DON'T KNOW WHAT THOSE INVESTMENT POLICIES ARE WHEN WE ARE DOING THAT.
UH, THIS IS, IF THIS IS A HUGE NUT TO CRACK, IT REALLY IS.
SO THIS IS THE BEGINNINGS FOR ME.
UH, THAT WAS A LOT OF RAMBLE THAT DID NOT TIE TOGETHER.
I APOLOGIZE, BUT THAT'S WHAT I'M CAPABLE OF AT THIS POINT.
CAN YOU, UH, JUST GIVE YOUR OPINION ON KAREN'S QUESTION ABOUT ASKING FOR THE BANKING INFORMATION SO WE DON'T HAVE TO GO ALL THE WAY AROUND TOGETHER? I WOULD LIKE THE BANKING INFORMATION BECAUSE I DO THINK THAT, AS I SAID BEFORE, SO IT DOES TIE IN IT THAT IS OUR RESPONSIBILITY HAVING BEEN ELECTED TO SIT UP HERE TO MAKE DECISIONS LIKE THAT.
AND IF I DON'T HAVE THE INFORMATION, I CAN'T MAKE A, A DECISION.
I KNOW THAT THERE'S A VALUE JUDGMENT WHOSE VALUE JUDGMENT AND WE'LL HAVE TO WEIGH THAT.
BUT AT THE SAME TIME, I DON'T EVEN KNOW WHAT IT IS I'M APPLYING ANY VALUES TO, UNLESS I SEE A, SOME SORT OF REPORTING SYSTEM COME BACK.
SO I I I, I WOULD LIKE THAT INFORMATION, YES.
UH, JESSICA, I'M GONNA ASK ANSWER KAREN'S QUESTION FIRST.
'CAUSE YOU KNOW, I WAS, WE DIDN'T NOBODY HERE OR I SAW A LOT OF INCREDULITY ABOUT THE DATA ON MIKE ON APPLE.
I DON'T KNOW WHY WE BELIEVE THE DATA ON THE BANKS ANYMORE.
I MEAN, I DON'T THINK WE NEED DATA.
I THINK WE ALL KNOW THAT THEY DID THIS AND THE PEOPLE RESPONSIBLE FOR SLAPPING THEIR HAND AND PUNISHING THEM DID THAT.
UM, I PERSONALLY DON'T THINK IT'S MY RESPONSIBILITY.
I DON'T WANT CITY COUNCIL TO, TO, TO MAKE INVE INDIVIDUAL INVESTMENT DECISIONS.
I MEAN, I'M WILLING, AND I BELIEVE IT'S APPROPRIATE FOR US TO SORT OF DECIDE ON WHETHER WE WANT E S G APPLIED OR NOT.
OTHER THAN THAT, I DON'T THINK WE SHOULD BE DECIDING ON, ON WHICH BANK OUR STAFF HAS HAD VERY, VERY GOOD RELATIONS WITH.
AND THAT HAS BENEFITED THE CITY ECONOMICALLY THROUGH EX EXTREMELY GOOD RATES THAT HAVE, UH, POSITIVELY AFFECTED OUR COMMUNITY.
UM, I THINK THE FACT THAT IT WAS A LONG TIME AGO, I MEAN, WE COULD DECIDE NEVER TO DO BUSINESS EVER BECAUSE OF SOMETHING THEY DID 15 YEARS AGO.
AND, YOU KNOW, IT WASN'T 15 YEARS AGO.
HOW LONG AGO WAS IT? 2002 TO 2016.
ANYWAY, MY POINT IS I DON'T, I'M NOT SURE, I DON'T BELIEVE THE COUNCIL SHOULD BE MAKING A
[01:55:01]
DECISION ABOUT WHICH BANK THE, UM, THE STAFF, ESPECIALLY BASED ON DATA THAT WE DIDN'T BELIEVE IN ANOTHER, IN ANOTHER INSTANCE.I, I DON'T THINK IT'S USEFUL TO PICK AND CHOOSE WHEN WE BELIEVE DATA.
SO NO, I DON'T THINK I WANT, WOULD SUPPORT GETTING THE INFORMATION ON THE BANK.
AND I DON'T SEE HOW WE COULD CHANGE OUR INVESTMENT POLICY WITHOUT HAVING ANY IDEA WHAT WE'RE DOING, UM, CUSTOMER SERVICE IN, IN, I MEAN, UNLESS WE DECIDE THAT WE'RE GOING TO ADOPT A GOVERNANCE, THE G PORTION OF, OF E S G AND APPLY THAT HERE BECAUSE WELLS FARGO WAS JUST A BAD ACTOR.
UM, IF WE BELIEVE THERE'S STILL A BAD ACTOR, THAT'S A DIFFERENT ISSUE.
BUT THEN THERE HAS TO BE SOME REASON FOR THAT.
SO I THINK THAT THERE'S, THE POLICY I DON'T BELIEVE SHOULD BE CHANGED UNTIL WE MAKE SOME OTHER DECISIONS, UNLESS OUR INVESTMENT PEOPLE THINK IT NEEDS TO BE CHANGED PURSUANT TO THE LACK OF DIRECTION
I, I WANNA THANK SHERRY FOR REACHING OUT AND GETTING THE, THE PROFESSIONAL, UH, CONSULTANT ASSISTANCE THAT SHE BELIEVED WE BEGAN TO NEED.
I THINK THAT'S GONNA LEAD US IN ALL THE RIGHT DIRECTIONS.
UM, I, I FEEL PRETTY COMFORTABLE, YOU KNOW, I THINK DEPENDING ON WHICH I FEEL OKAY WITH E I REALLY DO FEEL OKAY WITH IT, ALTHOUGH THAT'S PARTLY BECAUSE I'M, I'M OPERATING WAY UP HERE.
I COULDN'T, I COULD NOT GET THROUGH YOUR SLIDE DECK.
I HAD NO IDEA WHAT YOU WERE TALKING ABOUT.
IT WAS UTTERLY, UTTERLY SOMETHING THAT I HAVE NO INTUITIVE OR LEARNED KNOWLEDGE ABOUT.
I FALL EXACTLY INTO THE CATEGORY THAT BRIAN SAID OF, OF, BUT I DON'T WANNA SECOND GUESS MY INVESTMENT PEOPLE.
I YOU'RE HIRED TO DO THIS AND THAT'S, YOU SHOULD BE ALLOWED TO DO THAT.
SO I ACTUALLY WOULDN'T HAVE PROBLEMS WITH E I MAY BE THE ONLY PERSON HERE WHO DOESN'T, BUT I'M, I'M DOING IT BECAUSE IT IS A HIGH LEVEL.
I'M DOING IT FROM THE HIGHEST LEVEL AND WITH SOME, SOME RESPECT AND ACKNOWLEDGEMENT OF WHAT OUR STAFF SAID, A LEVEL OF COMFORT AND A LEVEL OF COMFORT WITH, WITH THE CONSULTANTS WHO ARE IN FACT EXPERT AT DOING THAT.
UM, SO THAT'S, DID I ANSWER THE QUESTIONS HERE? THAT'S WHERE I AM RIGHT NOW.
KAREN, DID SHE ANSWER THE QUESTIONS FOR YOU? YES, THANK YOU.
AND YOU WANTED TO ADD SOMETHING? I JUST HAD ANOTHER COMMENT.
MAYBE ACTUALLY IT'S A QUESTION.
UM, SO IF WE ARE TALKING ABOUT SELECTING THE E COMPONENTS, 'CAUSE THAT'S MORE STRAIGHTFORWARD FOR US OR WHAT WE'VE DONE WITH OUR COMMUNITY, I GUESS FIRST I NEED TO ASK THE TWO OF YOU WHETHER IT IS EVEN POSSIBLE TO SEGREGATE OR ARE ALL THE COMPANIES EVALUATED ON THE E, THE SS AND THE G, YOU HAVE FLEXIBILITY TO CHOOSE JUST THE E THANK YOU AS WELL AS INDUSTRY EXCLUSIONS IF YOU WANTED TO, LET'S SAY, UH, NOT ALLOW FOSSIL FUEL INDUSTRIES.
UH, JUST, JUST TO BE CLEAR AND ON THE RECORD, IN DECEMBER OF 2022, THE CONSUMER FINANCIAL PROTECTION BUREAU ORDERED WELLS FARGO TO PAY $2 BILLION IN REFUNDS TO OVER 16 MILLION CUSTOMERS, AS WELL AS $1.7 BILLION IN PENALTIES FOR CHARGING ILLEGAL FEES AND INTEREST ON AUTO AND MORTGAGE LOANS INCORRECTLY, REPOSSESSING CUSTOMERS CARS, MISMANAGING AUTO AND MORTGAGE LOANS.
SO THEY CONTINUE TO BE BAD ACTORS.
SO THAT'S FOR MORE RECENT OCCURRENCES OR ARE THOSE FINES FOR THE, FOR THE ORIGINAL ONES? NO, THESE ARE DIFFERENT FINES.
THE OTHER ONE WAS OPENING CHECKING ACCOUNTS.
THIS IS ON MORTGAGE AND, AND AUTO LOANS.
WELL, THANK YOU FOR THAT CLARIFICATION.
UH, AND PETE, WE'RE GONNA GO BACK TO YOU AGAIN IN A MINUTE.
WE'LL START WITH YOU TO GET THAT QUESTION ANSWERED ABOUT, UH, WELLS FARGO.
NOW, MAYOR OR A MINUTE? NO, NO, JUST, I JUST WANTED TO LET YOU KNOW I DIDN'T FORGET ABOUT YOU.
[02:00:01]
I'M NOT COMFORTABLE CHANGING FOR THE E UH, E S G, UH, FOR ALL THE REASONS MY COUNTERPARTS HERE HAVE STATED.UM, IT IS COMPELLING ABOUT THE E COMPONENT FOR, FOR THE ENVIRONMENTAL, UM, BECAUSE OF THE FACT THAT OUR POLICIES HAVE DONE OUTREACH AND WE HAVE GOTTEN INFORMATION, IT MIGHT BE SOMETHING WE MAY WANNA LOOK AT AGAIN.
BUT AS FAR AS RIGHT NOW, I THINK THE COUNCIL ITSELF, UH, AND I AGREE THE E S G SHOULD, UH, NOT BE, WE SHOULD NOT MOVE FORWARD WITH THAT.
AS FAR AS THE BANK, I'M A LITTLE PULLED IN TWO DIFFERENT DIRECTIONS.
I UNDERSTAND WHAT THE VICE MAYOR SAID, UH, BUT WE HAVEN'T BEEN SUBJECTED TO ANY ISSUES AT ALL.
UH, SHERRY, HAVE WE HAD ANY KIND OF AN ISSUE OF, UH, NO.
AND, AND I, I WOULD SUGGEST THAT WE GO THROUGH THE R F P PROCESS AND IF THAT'S A CONSIDERATION OF FINDING WHAT THEIR SCORES ARE, AND THAT CAN DEFINITELY BE INCLUDED.
I JUST WONDER WHAT THE RAMIFICATIONS WOULD BE.
SAY WE DID DECIDE TO DO THE STUDY AND WE FOUND OUT THAT WE, WE WERE CONSIDERING CHANGING TO ANOTHER, UH, FINANCIAL INSTITUTION, WHAT THE IMPACTS WOULD BE, FEES WOULD BE, UH, HOW SAFE THAT WOULD BE.
CAN YOU GIVE ANY INFORMATION ON THAT? UM, UNTIL WE WENT OUT AND DID AN R F P AND SEE WHAT WAS PROPOSED FOR RATES.
THERE'S, THERE'S NOT A LOT I CAN ANSWER, UM, AS FAR AS THAT.
BUT, UM, I, I FEEL LIKE WE DO GET GOOD RATES, UM, FROM WELLS FARGO, SO I THINK THEY WOULD BE VERY COMPETITIVE IN, IN THAT ASPECT.
AND, AND IT IS A, A PRETTY SIGNIFICANT UNDERTAKING TO CHANGE ALL THE BANKING SERVICES.
UM, AND, AND PART OF WHAT I WOULD LIKE TO SEE IN AN, UH, R F P FOR BANKING SERVICES, BECAUSE THERE ARE, THERE ARE SOME OFFSHOOTS ON SOME OF THE SERVICES THAT DON'T GO THROUGH WELLS FARGO THAT I WOULD LIKE TO SEE SOME CONSOLIDATION OF WHATEVER BANK WE GO WITH AND SOME OF THEM THAT WE'RE NOT QUITE AS HAPPY WITH IN SOME OF THE OTHER AREAS.
I THINK IT'S SOMETHING WE SHOULD LOOK AT.
AND WHILE ALL THE FINES ARE VERY COMPELLING INFORMATION THE DEVICE MAYOR GAVE ME JUST NOW IS VERY CONCERNING.
KAREN? YEAH, IT, I, THOSE SANCTIONS WERE FROM THE PERIOD UP TO, I BELIEVE, 2015, 2005 TO 15.
I THOUGHT THE VICE MAY SAID 2020, THAT IS 2022.
A LOT OF THESE THINGS TAKE A LONG TIME TO GO THROUGH AN ADJUDICATION PROCESS TO WHERE FINALLY FINES ARE IMPOSED.
ALSO, IF I COULD ADD, UM, WE ARE REQUIRED TO GO THROUGH THE WELLS FARGO GOVERNMENT SIDE.
SO WHAT HAPPENED THERE WOULD NOT HAVE BEEN PART OF THE GOVERNMENT SIDE.
SO EVEN GOING OUT AND DOING AN RP, LIKE WE WOULD WANT TO KNOW, UM, THE SERVICE LEVEL OF THE GOVERNMENT SIDE OF WHO, WHICHEVER BANK THAT IT IS.
ALRIGHT, I'M GONNA, I WOULD SAY WE WAIT ON THAT.
I'LL WAIT ON, ON ANYTHING THAT WE DO FOR THE BANK.
IF YOU SEE AN ISSUE, THEN LET US KNOW.
THIS CITY MANAGER SEES AN ISSUE, LET US KNOW.
WE'RE GONNA GO BACK AROUND TO THE VICE MAYOR TO MAYOR.
COULD I ASK YOU YOUR QUESTION OF, TO CLARIFY, WHAT DO YOU MEAN BY AN ISSUE? IF WE SEE SOMETHING THAT THAT AFFECTS THE CITY, OF COURSE, BUT NOT A GOAL, NOT, I'M JUST ASKING FOR CLARIFICATION.
I, I WOULD BE CONCERNED IF SOMETHING NEW CAME UP, NEW CHARGES, NEW CRIMINAL CHARGES OR WHATEVER, BANKING VIOLATION, REGULATION OF THE, UH, UH, BANK REGULATIONS, THEN IT WOULD BE SOMETHING TO BE CONCERNED ABOUT IF THEY, BECAUSE IF IT DID HAPPEN ON THE GOVERNMENT SIDE, I WOULD HOPE THAT CHERRY WOULD REALLY BE IN TUNE TO THAT.
THEN IT WOULD BE SOMETHING WE SHOULD LOOK AT AND, UH, REALLY HAVE A DISCUSSION.
BECAUSE FROM WHAT I UNDERSTAND, IF THE GOVERNMENT SIDE SEEMS TO BE OKAY AND WE HAVEN'T HAD THOSE ISSUES, I'D BE FINE WITH SAYING IF SOMETHING, IF THAT CHANGES, LET'S, LIKE ANYTHING CAN CHANGE.
I GUESS I, I'M SORRY, I GUESS I'M JUST LOOKING FOR CLARIFICATION BECAUSE IT SOUNDS LIKE THAT'S DIRECTION TO SAY KEEP AN EYE OUT FOR GLOBAL INFLUENCES, EVEN THOUGH THEY DON'T AFFECT US.
BUT THEN I'M HEARING THAT YOU'RE SAYING, BUT IT HAS TO BE AFFECTING US.
BUT IF IT'S A GLOBAL THING, HOW DOES IT, I'M JUST, I'M JUST TRYING TO GET IT NOW AND DOWN.
I'VE MADE MY, GIVE MY OPINION AND MM-HMM.
PETE, UH, WOULD YOU LIKE TO JUST WEIGH IN ON, ON CHANGING
[02:05:01]
OR GETTING THE R F P FOR A BANK? YEAH, THANKS, MAYOR.I MEAN, I DO HEAR
WHAT IS THAT? WHY? WELL, THE ISSUE ISN'T GETTING AN R F P FOR A BANK.
IT'S NOT, IT'S, KAREN ASKED THE QUESTION.
I'M, I'M SORRY, PETE, WE'RE DISCUSSING HERE WHILE YOU WERE TALKING.
WE SHOULDN'T HAVE BEEN DOING THAT.
JUST GIVE ME ONE MINUTE TO JUST GET CLARIFICATION.
WE'RE OPINING ON WHAT KAREN ASKED THE QUESTION FOR.
TO HAVE INFORMATION ABOUT WHERE WELLS FARGO STANDS VIS-A-VIS THE OTHER BANKS, THE LARGE BANKS IN THEIR SECTOR.
BUT WE SHOULDN'T HAVE BEEN TALKING OVER PETE, BUT I WANNA MAKE SURE HE GETS THE, UH, WINDOW CORRECTLY.
YEAH, AND I WAS, I WAS GOING DIRECTLY THERE.
I I DID APPRECIATE THAT QUESTION.
AND I DON'T, I DON'T KNOW WHERE IN TIME SHERRY WANTS TO THINK ABOUT DOING BANKING R F P, BUT I DON'T HAVE ANY OBJECTION TO GETTING, UH, AN E S G RATING FROM THE BANKS AS WE GO THROUGH THAT PROCESS.
I DON'T FEEL A NEED TO, TO HAVE TO SEE IT AND MU IT OVER OUTSIDE OF THAT PROCESS THOUGH.
SO, YOU KNOW, I THINK IT'S OKAY TO DO, BUT WHEN IT'S NEEDED.
I COMPLETELY CONCUR WITH COUNCILOR FURMAN.
UH, SO THAT'S ALL I'LL SAY ABOUT THAT.
AND I DO WANNA JUST CLARIFY ON SLIDE THREE OF YOUR DECK, IT LISTS OUT ALL THE DIFFERENT SECTORS THAT ARE AVAILABLE FOR PORTFOLIO ALLOCATION.
AND I JUST WANNA CLARIFY, WE'RE GIVING YOU FREE REIGN TO, TO REBALANCE OUR PORTFOLIO AMONGST ANY OF THOSE, UH, SECTORS.
CORRECT? I MEAN, WE'RE, WE'RE HANDING IT OFF TO YOU AS THE PROFESSIONALS.
I MEAN, THEY'RE GONNA OBVIOUSLY GET YOUR BUY-IN, BUT RIGHT NOW WE'RE ALLOCATED INTO FOUR SECTORS.
THREE MONTHS FROM NOW WE COULD BE IN EIGHT OR 10.
WE'RE HANDING YOU THE REINS EFFECTIVELY, RIGHT? THAT IS CORRECT.
SO WE WOULD MANAGE THE PORTFOLIO ACROSS THOSE PERMITTED SECTORS, AND THEN WITHIN OUR OWN INTERNAL CONTROLS, WE ACTUALLY HAVE LIMITATIONS AND POLICY LIMITS THAT ARE, UM, A LOT MORE CONSERVATIVE.
IT JUST GIVES US THE FLEXIBILITY ACROSS THOSE PERMITTED SECTORS TO INVEST THE FUNDS IN.
UH, MELISSA, WELL CAN I JUST ADD ON TO THE E COMMENT AS WE'VE GONE AROUND AS WELL AS ADDRESSING KAREN'S? GO RIGHT AHEAD.
UM, SO I'LL ADDRESS KAREN'S THING FIRST, AND IT'S ACTUALLY SHERRY.
UM, I THINK SHERRY MADE A REALLY STRONG CASE, UM, IN A QUIET WAY.
UH, IF WE'RE GONNA CHANGE THE E R P AND WE'RE DOING ALL THIS OTHER WORK AT THAT TIME, IT JUST FEELS LIKE UNDERSTANDING WHERE WE ARE WITH OUR BANK AND, AND HOW THE BANK STACKS UP ON ANY FACTORS YOU WANT TO PUT OUT THERE AS BEING THE RIGHT FACTORS TO LOOK AT IT.
THAT'S THE TIMING THAT WE SHOULD DO.
UM, BECAUSE BETWEEN THE TIME WHEN WE HAVE THEM COME BACK IN A MONTH OR TWO MONTHS AND THEN SIX MONTHS LATER WE GO AND DO THE, THE E R P, THE WORLD COULD HAVE CHANGED IN THE WORLD OF BANKING.
SO I JUST, I JUST FEEL LIKE WE SHOULD JUST DO THIS ALL AS ONE PIECE BECAUSE IF SHERRY SAYS THAT'S THE RIGHT TIMING, THEN I THINK THAT THAT'S THE RIGHT TIMING AND SHE WON'T FORGET BECAUSE SHE ALREADY SAID SHE WAS PLANNING ON DOING IT ANYWAY.
EXCEPT THAT WHAT PETE SAID, AND BRIAN CONCURRED, I THINK WHAT I HEARD IS THAT YOU WOULD FACTOR THE E S G RATING INTO A BANKING R F P.
IS THAT WHAT YOU GUYS SAID? YEAH, I DON'T, NO.
I DON'T, I DON'T KNOW HOLLY, HOW YOU DEFINE THE WORD FACTOR.
TO HAVE THE INFORMATION IN THE STREAM AS SHERRY'S GOING THROUGH THE PROCESS.
AND, BUT YOU KNOW, IT, IT SHOULD BE, IT SHOULD BE REPORTED AS PART OF HER ANALYSIS AND HOW MUCH SHE RELIES ON THAT VERSUS RELATIONSHIP VERSUS SAFETY, LIQUIDITY, OPTIMAL YIELD, WHATEVER, ALL THE REST OF THE THINGS THAT SHE WANTS TO LOOK AT.
I WOULD RELY ON HER TO THINK ABOUT THAT.
WELL, I WOULD CONCUR AS WELL BECAUSE I DIDN'T, WHEN I ASKED FOR IT, DID NOT KNOW WE WERE GONNA BE DOING AN R F P FOR BANKING SERVICES.
AS LONG AS THAT'S A CRITERIA IN THERE THAT YOU CAN WEIGH AS YOU SEE FIT.
YEAH, WE, WE CAN INCLUDE THAT IN THERE.
UM, TYPICALLY LIKE THE GRADING CATEGORIES WHEN YOU'RE TRYING TO DO YOUR SCORING,
[02:10:01]
UM, LOOKING AT LIKE THE QUALITY OF SERVICE AND, AND THINGS LIKE THAT.LIKE IT COULD FIT INTO A MUCH BROADER CATEGORY IS SOMETHING THAT PEOPLE WILL CONSIDER AND GO, AH, I GIVE IT SOME CREDENCE IN THE WAY I'M SCORING OR I DON'T QUESTION ME.
SO IF I JUST ONE SECOND PLEASE.
SO IF I COULD JUST FINISH UP, UM, ADDRESS THE E COMPONENT MM-HMM.
SO OBVIOUSLY I'M VERY FOR THE E COMPONENT, RIGHT? WE ALL KNOW DRIVE AN ELECTRIC CAR, HAVE SOLAR PANELS ON MY HOUSE, YADA, YADA, YADA.
HOWEVER, WHEN YOU LOOK AT THE CATEGORIES TO CONSULAR ELLA'S POINT, IF YOU WERE TO EVEN SAY, LET'S JUST GET RID OF OIL AND GAS, YOU STILL LEAVE IN FRACKING, WHICH IS NOT, WELL, I GUESS FRACKING'S GAS NOW, NATURAL GAS SORT OF.
SO YOU MIGHT PUT FRACKING, SHALE ENERGY IS FRACKING.
UM, BUT THERE ARE OTHER THINGS THAT ARE THERE AS WELL.
NUCLEAR, SOLAR, WIND, UM, YOU KNOW, HOW, HOW ARE ALL THOSE, THEY'RE NOT FOSSIL FUELS.
SO I THINK THAT IT'S, IT'S A BROAD TOPIC WHEN YOU TALK ABOUT ENERGY AND IT'S ONE THAT UM, YOU KNOW, I KNOW HOW THE PEOPLE WHO ARE SITTING OUT HERE THINK, UM, IN, IN OUR AUDIENCE.
BUT IT'S SOMETHING THAT WE NEED TO JUST MAKE SURE WE'VE E EXPANDED TO WHATEVER CATEGORIES YOU HAVE AND THEN MAKE SURE THAT WE ALL AGREE THAT THAT'S WHERE THE COMMUNITY IS.
'CAUSE SOME OF THESE ARE KIND OF ON THE BORDER.
SO, UM, I JUST WANTED TO EXPAND OUT.
EVEN FOSSIL FUELS CAN GET TRICKY.
I HAVE THAT COUNCILOR WILLIAMSON, YOU WANTED TO ADD IN.
EXACTLY AS TO THAT POINT, BECAUSE I, I THINK IF YOU LOOK AT THE HIGH LEVEL, AND WE DON'T DE I DON'T DEMAND THAT I UNDER UNDERSTAND 100% EVERYTHING.
THAT PART GOES INTO THE WHOLE THING.
SAY FOR EXAMPLE, YOU EXCLUDED FOSSIL FUELS.
I DON'T UNDERSTAND EVERY SINGLE OF THE OTHER CATEGORIES.
IT'S NOT LIKE THIS IS GOING TO REDUCE CARBON TO ZERO, BUT IT DOES DO TWO THINGS.
ONE, WE HAVE A CARBON REDUCTION PLAN.
WE KNOW FOSSIL FUELS CONTRIBUTE TO CARBON.
THERE'S, IT'S, THAT'S NOT LIKE YOU DON'T HAVE TO UNDERSTAND MUCH TO, TO SORT OF MAKE THAT CONNECTION.
AND SO THAT JUST SAYS IT, IT'S A STATEMENT.
IT'S A STATEMENT OF SOMETHING THAT WE HAVE SAID OVER AND OVER AGAIN.
AND THAT
THE CHARTS ARE THE CHARTS ARE THE CHARTS, YOU KNOW, DOES IT INCLUDE THIS? OH, WHILE YOU THINK IT MIGHT, IT DOESN'T, IT'S OVER HERE.
THIS IS SORT OF SAYING, DO WE WANNA TAKE A STEP IN TERMS OF, OF INVESTING IN A PLACE WHERE WE HAVE SOLID CONNECTION TO SOMETHING WE'RE DOING AS A POLICY AND A VALUE.
AND THIS IS A STEP, IT'S LIKE I SAID, IT'S NOT PERFECT AND I DON'T HAVE TO UNDERSTAND EVERYTHING THESE PEOPLE KNOW TO, TO SORT OF SAY THAT.
BUT AS I SAID, I, I TEND TO OPERATE ON THE, ON THE TOPES TOPES ON THE TOPES MACRO.
AND SO I THINK THAT THAT JUST EXCLUDING FOSSIL FUELS JUST ALONE WITHOUT GIVING IT ANY MORE THOUGHT, BECAUSE WE'LL SEE IT AGAIN NEXT YEAR AND WE CAN SAY SOMETHING, THEN WE CAN ALWAYS CHANGE IT.
WHICH IS WHY I SAID I SUPPORT JUST THE E AND I SUPPORT THIS AND THE E SO THERE YOU GO.
I JUST WANTED TO BE CLEAR 'CAUSE I WASN'T CLEAR WHEN I FIRST WENT AROUND.
KAREN, DO YOU HAVE THE INFORMATION YOU NEED? YES, I BELIEVE SO.
I DO NOT BELIEVE THAT
SOMETIMES I THINK I CAN READ THE FACE, BUT SOMETIMES I CAN'T.
I CAN'T, I CAN'T SEE THE FACE.
SHE SAID SHE HAS ENOUGH FOR TO MAKE A DECISION TO, TO MOVE FORWARD.
NOT, NOT, WE MADE THE DECISION.
UM, IS THERE ANYTHING ELSE IN CLOSING ANYBODY WANTS TO ADD? I THINK WE'VE BEATEN THIS HORSE.
I SHOULDN'T EVEN USE THAT DEROGATORY STATEMENT BECAUSE I DON'T LIKE TO BEAT HORSES.
SO, DISCRETIONARY CATEGORY MAYOR.
SO I WASN'T TRYING TO, YOU KNOW, PERSUADE YOU ANYWAY, UH, THAT THAT'S
[02:15:01]
NOT P FM'S VIEW THAT, YOU KNOW, WELLS FARGO SHOULD RATE INTO THE HIGH RISK CATEGORY.I WAS PURELY CONVEYING WHAT, HOW SUSTAINALYTICS RATES THEM AND THEIR VIEW.
AND IF YOU ARE TO GO THROUGH AN R F P PROCESS FOR THE BANKS, YOU COULD ASK THE BANKS IN THAT, UH, PROPOSAL TO COMMENT ON THE RISK RATING BECAUSE OFTENTIMES THEY ARE AWARE OF HOW THEY RATE FROM THE DATA PROVIDER.
UM, THREE B DISCUSSION, POSSIBLE ACTION REGARDING FUTURE IDEAS FOR, UH, REGARDING IDEAS OF FUTURE AGENDA ITEMS. DO WE HAVE ANYTHING? PETE, DO YOU HAVE ANYTHING TO WEIGH IN, SIR? OKAY.
[5. ADJOURNMENT]
MEETING IS ADJOURNED.THAT'S GONNA BE IN THE, WELL, WE'LL START HERE AND THEN GO INTO THE OTHER.