A proposed policy that would implement stricter rules around how Long Beach invests its money has been approved by a city commission \u2014 in an effort to ensure the town doesn\u2019t support companies that violate human, labor, environmental and other rights \u2014 though it remains to be seen whether the council will take up the item for further consideration.<\/p>\n
The policy, dubbed the Civil and Human Rights Investment Screening, was originally brought to the city\u2019s Equity and Human Relations Commission in September by the Long Beach Area Peace Network, a coalition of organizations dedicated to advancing social justice.<\/p>\n
The idea for the proposal had been in the works for quite a while before it was first brought to the EHRC, according to Francesca Chaboya, an organizer with the Long Beach Area Peace Network.<\/p>\n
\u201cIt just sort of organically came together because a lot of the folks that were involved in this work, including myself, we do a lot of community work and are engaged in the community in Long Beach in various capacities,\u201d Chaboya said in a Monday, Dec. 8, interview. \u201cThere was this desire to do more in our city, to be more actively engaged, and there seems to be this sense of urgency that we hear from a lot of folks especially as it relates to accountability for our governing bodies, whether it\u2019s local or national.\u201d<\/p>\n
Much of that desire for increased accountability, Chaboya said, centered around how Long Beach spends its money \u2014 leading to the development of the Investment Screening Policy.<\/p>\n
After many conversations, LBPAN developed the policy, which is intended to prevent Long Beach from investing money in corporations and other businesses entities that engage in or are complicit in six key areas of concern; those areas of concern are in the official policy.<\/p>\n
The policy, which the EHRC approved and sent to the City Council for further consideration during its Oct. 9 meeting, would prohibit the city from making or maintaining \u201cany current or future investment in a company, fund or institution that is complicit in, facilitates or materially benefits from\u201d the following, according to the proposed policy:<\/p>\n
Genocide, apartheid, military occupation and forced displacement as defined in the 1949 Geneva Conventions, and widespread or systematic human rights violations.
\nLabor rights violations.
\nState violence, including by providing \u201ctechnology, surveillance equipment, or arms to governments or state agencies that have been credibly accused of extrajudicial killings, torture, or suppression of dissent by the U.S. Department of State, United Nations, or internationally recognized human rights organizations.\u201d
\nOngoing environmental harm.<\/p>\n
The policy would also ban the city from working with companies that lack \u201csupply chain due diligence\u201d in compliance with California Senate Bill 657, which requires companies to disclose efforts to eliminate slavery and human rights abuses from supply chains. And it would require the city to prioritize investments in companies that publish annual civil and human rights impact reports; have environmental, social and governance committees; and disclose their political contributions and lobbying activities in relation to civil, human and social rights issues.<\/p>\n
Alongside implementing those restrictions on city investments, the policy would also create protocols to monitor city investments and require the city to provide the general public with an annual report summarizing the results of the new policy \u2014 including \u201cany divestments, engagements, or changes made to investment policies,\u201d the policy said \u2014 which would be made available on the city\u2019s website and presented during a City Council meeting.<\/p>\n
The initial version of the policy submitted to the Equity and Human Relations Commission drew significant concern from Long Beach\u2019s Department of Financial Management, which wrote in a Sept. 19 public comment letter that \u201cthe policy as proposed would result in serious unintended consequences\u201d to the city\u2019s financial position.<\/p>\n
The Sept. 19 letter, authored by Financial Management Director Kevin Riper, estimated a potential $2 million annual cost to hire new staff to implement the policy, alongside the potential loss of up to $80 million in structural city revenue each year \u2014 including $12\u00a0 million from the general fund.<\/p>\n
\u201cThe six broad categories of disqualifying violations proposed \u2014 ranging from corporate complicity in state violence and displacement, to labor violations and environmental harm \u2014 are so broadly defined and open to such a wide range of interpretation that likely every company in the country that the California Government Code permits cities to invest in could be interpreted to have committed at least one or several of the listed violations,\u201d the letter said. \u201cThis could effectively disqualify the entire private sector from being invested in by the city treasurer.\u201d<\/p>\n
The letter also said that under the standards outlined in the original policy, Long Beach would likely have to stop investing in U.S. government securities, which are the city\u2019s \u201csingle largest and most reliable investment category.\u201d<\/p>\n
Riper also raised concerns about the definition of investment in the original proposal, the lack of a proven model of similar policies successfully implemented by other governments, and the potential unintended consequences of adopting such a policy.<\/p>\n
In response, the Long Beach Area Peace Network adapted the policy to align its definition of investment with the city\u2019s \u2014 to ensure the policy would strictly apply to actual investments and wouldn\u2019t impact other city business or contracts, Chaboya said.<\/p>\n
\u201cThe intent was only to apply to the treasury and portfolio investments made by the city treasurer or the investment officers,\u201d Chaboya said of the original policy language, \u201cand so we never intended for this to extend to additional contracts or projects implemented by the city. But understandably so, there was a disconnect between how we had officially defined investments in the policy in comparison to how the city defines investments. So it was just moreso a clarifying point.\u201d<\/p>\n
The EHRC voted to forward the policy to the City Council for further consideration and potential adoption after the Financial Management Department attended the commission\u2019s Oct. 9 meeting to answer questions about the policy\u2019s impact and the clarification was made.<\/p>\n
\u201cThe policy is quite different,\u201d Riper said about the updated investment screening proposal at the October meeting. \u201cFor example, it exempts from the screening U.S. Treasury securities. So even if we had to liquidate the rest of the portfolio for these private companies, we could at least reinvest those proceeds in Treasury securities.\u201d<\/p>\n
That means that Financial Management\u2019s original estimate that the policy could potentially reduce annual city revenue by $80 million dropped down to a possible loss of about $7.5 million in revenue each year.<\/p>\n
Riper also said that the changes to the proposed policy would reduce the need for additional staff members from about 12 new people to around four or five instead \u2014 which would still cost the city an estimated $1 million each year.<\/p>\n
Even with those changes and the reductions in potential cost and loss for the city, concerns about the investment screening\u2019s impacts were reaffirmed by the city manager\u2019s officer in a Nov. 21 letter, which was submitted to the City Council and mayor after the commission\u2019s vote.<\/p>\n
\u201cWhile the intent of the EHRC\u2019s proposed policy aligns with the city\u2019s values to advance equity, the proposed Civil and Human Rights Investment Screening Policy would have serious unintended consequences that could compromise the city\u2019s ability to maintain those very commitments,\u201d the letter said. \u201cThe proposal\u2019s scope and structure would have significant and far-reaching financial and operational impacts.\u201d<\/p>\n
The city manager\u2019s letter also recommended that if the council were to take up the policy for discussion and potential adoption, it should go through Long Beach\u2019s budget review process for \u201cadditional fiscal analysis, clarification of definitions, and a more targeted approach,\u201d especially since the city is already facing a structural budget deficit for the next fiscal year.<\/p>\n
The letter also noted that Long Beach already has an investment policy with \u201cstrict legal and ethical standards\u201d in compliance with California Government Code and professional standards, which include restrictions against investments that \u201cpresent conflicts of interest or fail to meet safety, liquidity, and yield requirements.\u201d<\/p>\n
Riper, at the October meeting, also noted that the city treasurer already publishes a list of every Long Beach investment to the City Council agenda once each quarter \u2014 which outlines all of the investments the city owns.<\/p>\n
Chaboya, meanwhile, said Monday that the Long Beach Area Peace Network worked with advocates, lawyers and others to write the policy, relying largely on the existing investment policy set forth by Long Beach and the California state government.<\/p>\n
\u201cWhen we wrote the policy, the intent was to ground this in pre-existing policy, and also ground this in the city\u2019s already existing commitments to ethical governance,\u201d Chaboya said. \u201cIt is to our understanding that the city already implements some sort of screening process when it comes to investments, so our ask is just to add an additional layer to the existing process, and to add a layer of accountability so that the citizens of our city are aware of where our funds are contributing to. I think that we\u2019ve seen an increasing ask from Long Beach residents when it comes to accountability \u2014 and especially when it comes to the budget.\u201d<\/p>\n
It\u2019s unclear when, or if, the City Council will take up the item for further consideration. The city manager\u2019s office, in a Friday, Dec. 5, statement, said it \u201ccannot speculate on how (the) mayor and City Council will proceed.\u201d<\/p>\n