Translate MySQL query to PostgreSQL
Remove the alias from the left side of the SET clause:
update dmsf_files f
set project_id = (select d.project_id from dmsf_folders d
where d.id = f.dmsf_folder_id and d.system = 1)
where (select dmsf_folders.system from dmsf_folders
where dmsf_folders.id = f.dmsf_folder_id) = 1;