Albany committee recommends ESG implementation policy (C4) with aerospace and oil-and-gas exclusions, and asks council to consider a values statement

The Albany City Council Standing Committee on Audit and Fiscal Sustainability voted to recommend that City Council adopt an ESG implementation approach that staff characterized as Option C4: Sustainalytics-based screening limited to issuers with low or moderate ESG risk, refined by selecting top performers within each subindustry.

The recommendation, approved by the committee, adds negative screening for the aerospace and defense subindustry and for oil-and-gas producers and energy services, permits the council to designate additional companies for exclusion, and directs the portfolio manager and investment adviser to seek opportunities to sell existing holdings in now-excluded categories when such sales can be executed without incurring a financial loss.

Raina Shorts, finance director and city treasurer, summarized the staff analysis of ESG approaches and recommended a balanced option that she described as both cost-effective and administrable. "The recommendation trying to balance all those pieces is to use a base of something like sustainability that provides a bridal, well rounded approach or at least a broad approach to ESG criteria, but not to overly complicate it...and the recommendation would be C4," Shorts said.

Staff outlined three broad approaches identified by the city's adviser PFM: (1) negative screening (exclude specific sectors or issuers), (2) positive screening (favor issuers with stronger ESG characteristics), and (3) blended approaches. Staff and PFM explained that the Sustainalytics data set classifies issuers into buckets (negligible, low, moderate, high, severe ESG risk) and that more-complex mixes increase operational fees.

Committee members discussed several practical trade-offs: (a) Sustainalytics' categorization is a point-in-time measurement at purchase and does not produce a simple percentile cut that some members requested; (b) tighter exclusion thresholds would materially shrink the universe of authorized investments; and (c) specific-name exclusions (for example, Lockheed Martin or Caterpillar were cited by public commenters) are operationally feasible but require council direction.

Members of the public urged a more explicit values statement and company-specific exclusions. One commenter (Peter, public) said Albany should be explicit about the city's values: "We are not asking Albany to try to end this genocide. We are asking Albany not to make any money from it." Public commenters named Lockheed Martin, Caterpillar and Chevron as companies they would like excluded.

The committee adopted a motion recommending the C4 approach with the stated exclusions and with a direction that staff and the adviser prepare an ESG implementation policy and a draft amendment to the investment policy that references the ESG policy. The motion also included a recommendation that the full City Council consider whether to adopt a separate values statement related to avoiding investments that profit from human-rights abuses; committee members agreed the value-statement text should be considered at a future meeting and not decided that night.

Staff and the investment adviser said that, if Council adopts the recommended approach, the city would receive quarterly ESG reporting in addition to regular investment updates and staff would prepare materials for Council consideration; staff projected the earliest practical Council consideration would be in the fall (staff mentioned early October as a plausible earliest date). The committee specifically asked that any instruction to stop future purchases in excluded subindustries be applied from the adoption date forward and that advisers be authorized to seek opportunistic sales of existing holdings when those sales would not create an avoidable financial loss.

The committee vote forwarded the matter to City Council with the recommended implementation approach and the request that Council consider a separate values statement and a process for periodic review.