Albany narrows proposed ESG investment policy, adds exclusions and asks staff for value statement work

Albany's City Council on Sept. 2 moved forward with a resolution directing staff to implement an environmental, social and governance (ESG) approach to the city's investments while adding several explicit industry exclusions and directing a committee to draft a broader values statement for council review.

The finance director presented a multi-pronged implementation policy that combines three elements: (1) industry exclusions, (2) an overall ESG risk limit based on third-party scores, and (3) a requirement that eligible issuers be in the top half of performers within their sub-industry. The approach aims to limit financial risk while aligning investments with the city's ESG priorities.

Under the policy staff described at the meeting, the exclusions and screening would be forward-looking and effective after adoption; currently held securities that fall within newly excluded classifications would generally be held to maturity unless they can be sold without incurring a loss. The implementation approach relies on third-party ESG risk ratings (staff referenced Sustainalytics) and focuses on issuers already approved for municipal investment under staff's asset manager (PFM Asset Management).

Council members asked staff to add several industry exclusions to the draft. The council-approved motion added refiners/pipelines (sometimes referred to in staff materials as refining and marketing), tobacco, and firearms & ammunition to the initial exclusions (staff had earlier proposed oil and gas producers, energy services, and aerospace & defense). Councilmembers also asked that the ESG implementation policy be formally reviewed at least annually in conjunction with the city's required annual investment-policy review.

Mayor Robin D. Lopez and other council members discussed whether the council should craft a values statement to guide the ESG rules. The council voted to refer development of a value statement to the Audit & Fiscal Sustainability Committee for drafting and later council review.

The finance director and representatives from PFM Asset Management told the council the proposed approach would remove roughly 20% of the asset manager's approved issuer list under the combined screening criteria; staff said the policy sought a tractable, administrable approach that balanced values alignment with portfolio performance and implementation costs.

The council's motion passed with recorded affirmative votes from the members present. No immediate portfolio liquidation was ordered; the policy provides for orderly disposition of holdings only when it can be done without material financial loss.

Why it matters: The city holds public funds that must be managed conservatively under state law. Incorporating ESG screening into the investment policy will change where the city buys new securities and may gradually reshape the municipal portfolio. The council also directed staff to prepare a public-facing value statement to articulate the city's priorities for ESG screening.

Votes at a glance: Council voted to adopt the ESG implementation policy and to refer a value-statement drafting process to the Audit & Fiscal Sustainability Committee; recorded votes were unanimous among members present (Mayor Robin D. Lopez, Vice Mayor McQuaid, Councilmember Jordan and Councilmember Mickey). Councilmember Anser Romero was absent.

What's next: Staff and the city's investment advisor will operationalize the exclusions and screening criteria, prepare a regular annual review process, and the committee will draft a value statement for council consideration.