Vermont pension board will not divest from fossil fuels

Carl Martin, fossil fuel divestment

Carl Martin, right, of Montpelier attends a meeting on Tuesday of the Vermont Pension Investment Committee. Photo by Amy Ash Nixon/VTDigger

The Vermont Pension Investment Committee (VPIC) voted unanimously Tuesday not to consider divesting from fossil fuel companies in whole or in part.

The panel concluded divestment would not be in compliance with the committee’s Environmental, Social and Governance Initiatives policy.

The committee discussed and took testimony on divestment for three hours Tuesday in the auditorium at the Pavilion Building.

VPIC Chairman Stephen Rauh stressed the board’s fiduciary duty to beneficiaries of the retirement system.

“We were not created as an agent of social change,” Rauh said.

The amount of pension funds invested in fossil fuel companies is estimated to be $263.4 million, according to the state treasurer’s office. The funds total $4 billion.

Douglas Moseley of NEPC LLC, a fiduciary adviser for the state, recommended against divesting from fossil fuels. He said there would be transaction fees associated with moving pension fund investments, and eliminating fossil fuel companies from the portfolio “would change the overall risk balance” of the fund.

Matt Considine, director of investments for the State of Vermont, said divestment would be a $9 million hit annually to the pension fund.

And there is no discernable environmental benefit, Considine said. Divestment would be “a symbolic gesture,” in his view.

“The various proposals for divestment have failed to articulate any quantifiable or otherwise measurable benefits,” he said in a report to the committee.

“Instead, divestment is presented as a tactic to ‘politically bankrupt’ specific companies,” Considine wrote. “As such, Staff has been unable to determine any meaningful impact from the initiative, such as actual reductions in production or consumption of fossil fuels, or any change in behavior created from VPIC’s not owning a security.”

State Treasurer Beth Pearce spoke at length about the committee’s first duty: Vermont retirees.

“Our first and foremost responsibility [is] to the 48,000 active and retired members,” of the state’s retirement system, she said. “We are fiduciaries; our job is to get enough income in the fund to support the retirement security of those 48,000 people and I take that very seriously. At the same time I believe that climate risk is real.”

Pearce said the state is committed to helping with climate change and said she is personally compelled to “continue the fight on climate change.”

“I want to get that message across,” she said, “just as folks here want to get that message across.”

About 50 climate change activists, including students, retired and active state employees and legislators, turned out for the committee meeting, many wearing bright orange T-shirts with messages urging divestment printed on them.

After the vote, attendees affiliated with 350 Vermont and the Vermont Chapter of the Sierra Club chanted in unison as they exited the doors to the auditorium.

Ed Stanak, a retired state employee and past president of the Vermont State Employees Association, criticized the committee for refusing to re-evaluate an “outdated” policy.

Stanak suggested the vote was “politically driven.”

“Absent a thorough consideration of impacts on the retirement fund that will result by not divesting — in light of the growing body of data and analyses available on both the environmental and health impacts of climate change and the reasonably forseeable dire financial effects, VPIC would appear to be moving to a premature comprehensive decision on divestment without having taken appropriate steps for informed decision-making,” he said.

Catherine Lowther, a faculty member from Goddard College, and chair of Goddard’s sustainability committee, said Goddard divested from fossil fuels in January, and there have been no added fees or costs, and the portfolio is doing as well as it had earlier.

Pearce asked Lowther after the meeting to see the portfolio.

Lowther pointed to other colleges in the region that have divested, including Sterling College and Green Mountain College in Vermont, the University of Maine and Syracuse. Global institutions such as the government of Norway, the Church of England and the Rockefeller Foundation have also eliminated fossil fuel companies from their investment portfolios.

Joanie Maclay, a retired state employee, said while she was “deeply concerned for the environment, that is why I’m proud to be a Vermonter,” that she also is “equally concerned about the state of our retirement fund.”

Amy Ash Nixon

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  • This is a bad decision morally, environmentally AND financially. Divestment is a powerful tool with tangible environmental benefits because it stigmatizes fossil fuels (as we have stigmatized tobacco) and forces social change.

    Given that VPIC won’t act, it’s now up to the Legislature to act on divestment, as it has in the past on South Africa under apartheid.

    Thanks for this report, Digger. But a more balanced article would have quoted divestment supporters at the top, not just the bottom.

    • Renee Carpenter

      Well Said!

  • David Ellenbogen

    “We were not created as an agent of social change,” Rauh said.

    Well if this were 100% true, why did Treasurer Pearce waste taxpayer money traveling to the Exxon shareholders meeting in an unsuccessful attempt to get them to change their policy?

    Overlooked entirely by the VPIC is the fact that their fiduciary interest should extend not just to retirees, but to their descendants who will inherit a changed planet thanks to companies like Exxon.

    One thing the Exxon board and the VPIC have in common: their minds were made up before they heard what the public had to say.

  • Tom Sullivan

    Hey Gregory,

    My question is, If there was a divestment in fossil fuel, and the pension fund got hit with the projected $9 million loss annually which hurt Vermont families, what would your response be to them?

    • John Greenberg

      Tom Sullivan:

      ”If there was a divestment in fossil fuel, and the pension fund got hit with the projected $9 million loss annually which hurt Vermont families, what would your response be to them?”

      That’s a fair question, but it explicitly depends on a hypothetical proposition which is in doubt here. So …

      If there were a divestment and the pension fund did just as well or better, what would YOUR response be?

      • Glenn Thompson

        From my own experience as an investor, I’ve made a heck of a lot more money investing in Fossil Fuel companies compared to investments in green energy companies…knowing all to well, investing in stocks is like a ‘crap shoot’! That is why a smart investor seeks advise from financial experts and not listen to ignorant people who base opinions on emotions and hysteria!

        PS. about 10 years ago, I followed a group of about 20 Green Energy stocks which today, most have either gone out of business or penny stocks! Most of my current Fossil Fuel stocks pay out a good dividend and fairly safe investments. I’d encourage state officials and anyone else to pay attention to financial advisers and totally ignore any “background noise”!

        • John Greenberg

          Glenn Thompson:

          Divesting from large fossil fuel companies is not the same as investing in green energy companies. That’s certainly one option, but it is far from the only one, and as far as I’ve heard, it is not among those being discussed here.

          The financial question you SHOULD be asking is whether the fossil fuel companies which have, in the past, provided good investment returns are likely to continue to do so in a world increasingly committed to moving away from burning those fuels.

          Right now, the political movements in this country and elsewhere to leave fossil fuels in the ground are relatively weak, but were they to grow stronger, the assets which these companies have historically depended on could easily become “stranded.”

          It is certainly sound policy to allow investment decisions to be guided in part by historical performance, provided however that one doesn’t fail to ask whether changes in circumstances are likely to imply significant changes in the future of the business being examined. But failure to take such changes into account will put investment managers in precisely the same situation as buggy-whip investors when the automobile was first introduced.

          The performance of coal companies in the last five years should give at least SOME pause to anyone assuming that the past is always a prologue to the future.

          • Glenn Thompson

            John Greenberg,

            “Divesting from large fossil fuel companies is not the same as investing in green energy companies. That’s certainly one option, but it is far from the only one, and as far as I’ve heard, it is not among those being discussed here.”

            Who said it was? I only used it as an example!

            “The financial question you SHOULD be asking is whether the fossil fuel companies which have, in the past, provided good investment returns are likely to continue to do so in a world increasingly committed to moving away from burning those fuels.”

            Fossil fuel stocks will remain good investments until the time comes when another technology comes along to replace them! That hasn’t happen yet!

            Final point! I give Beth Pearce credit for putting Vt. Retiree’s best interest first. Most likely listening to the advise of the state’s financial planners and ignoring the rants from the Peanut Gallery!

      • Tom Sullivan

        Hey John, thanks for your response.

        “If there were a divestment and the pension fund did just as well or better, what would YOUR response be”

        I would say that’s wonderful. You made a choice that moves us away from fossil fuels while your pension performed well.

        But that hypothetical comes from the pension fund manager, and his goal is to have the pension fund perform as well as it possibly can. And if divestment hurt the pension fund, wouldn’t he be doing a disservice to present and future retirees?

        • John Greenberg

          Tom Sullivan:

          My point above was merely to underscore that the hypothetical about underperformance is just that: a hypothetical.

          “But that hypothetical comes from the pension fund manager, and his goal is to have the pension fund perform as well as it possibly can.” That may be the manager’s goal, but I am not ready to assume either a) that he or she is achieving it to the maximum degree or b) that his or her strategy is the only one which would bring similar results. Accordingly, I think it is at least reasonable to ask what the basis is for the hypothetical conclusion and to question whether that basis is sound. At the moment, you can count me as “from Missouri” in that regard: show me!

          In particular, I would want to see evidence not only that performance would drop in the short term (assuming that indeed it would), but that it would remain lower over time, since pension funds are inherently investments with a very long time horizon.

          From what I can see, within the next, say, ten years, the energy world is going to look VERY different from what we see looking out today. The dominance that fossil fuels have enjoyed in the past and continue to enjoy today is likely, in my view, to diminish VERY substantially. Energy competition will increase (it already has, but will do so significantly more in the next few years), such that what used to be reliable, dependable markets no longer have either characteristic. Just ask the coal companies!

          All of that means that it is entirely possible that there would be a short-term dip in performance, but that it would lead to a safer, and more assured performance in the longer term. It is quite common in the financial world to find that short-term and long-term performances do not go hand in hand. That, in turn, underscores even more the need to understand clearly the analytical framework for whatever predictions are being made about financial performance of divesting or not divesting.

          The larger question you raise is one involves various competing interests. Surely the pension fund trustees have a fiduciary obligation to consider ALL aspects of what is best for their clients, including, as some other commenters have noted, the kind of future that is being created for them as well as their kids and grandkids. The discussion in the article and in these comments only begins to skim the surface of a difficult set of questions. Accordingly, I’m not ready to answer the larger question at this juncture.

  • Chris Kayes

    This was a great decision morally, environmentally AND financially. Lack of diversity can be fatal for long term investments.

    As many have pointed out, there is no moral, environmental or financial need to divest from fossil fuels.

    As indicated by some of the comments on this article, there is a severe lack of understanding regarding the use of alternative energy sources.

    To form an educated opinion on this topic, please take the time to read

    • Kathy Nelson

      Chris, a quote from your link:

      “1. The appropriateness of solar to replace grid level baseload power generation. Solar in general, regardless of the collection system: – photovoltaics or PV, concentrated PV, concentrated solar driving conventional steam turbine generators and thermal — are extremely inefficient in comparison to their enormous size and cost.”

      Your link is more about production of solar panels with little concern about the environmental damages associated with that manufacture, transportation and poor siting of large solar arrays..

      Use of small scale solar for residential use is the best way to use solar. Industrial scale solar arrays have more drawbacks than benefits, and being intermittent, solar can never be a baseload generator on the grid.

  • Linda Baird-White

    The current administration has a long track record (3 terms) that includes multiple failures where thorough research is concerned. Best to leave things as they stand for now until we see what the next election brings. We’ve seen too many epic failures and VT is not in a position to withstand any more of the same.

  • VPIC Chairman Stephen Rauh stressed the board’s fiduciary duty to beneficiaries of the retirement system.

    “We were not created as an agent of social change,” Rauh said.

    This wasn’t always the case…i.e. the MacBride Amendment in 1989-90 divestment of industries in Norther Ireland.
    Also what about fiduciary responsibility to those taxpayers who supply the funds for the pensions? Shouldn’t they have a say?

  • Mary Reed

    In addition to the known disastrous ecological effects of fossil fuel extraction and use, at the rate we humans are doing that, fossil fuels will eventually be gone from the earth. We are developing alternatives such as solar and wind, boosting hydro-power, and we are using ‘stepping stones’ away from oil and coal, mainly natural gas. Perhaps, eventually, we will have the technology to harness and use hydrogen gas, one of the most widely available elements in the universe, for most of our power needs, and it could be truly ‘clean’.

    Moving away from fossil fuels is a long process, one I think will take at least several hundred years to accomplish. Divestment is a related issue – I think it will happen over time, as the financial impacts and processes to enhance, not endanger, the pension fund become more clear. By all means, let’s watch the long-term (five to ten years) performance of large funds that have divested. If there are enough successful models, then divestment might be a safe and responsible action. A subset of that could be responsible investment in companies showing good financial performance in developing and marketing alternatives to, and ‘stepping stones’ away from, fossil fuels.

  • fred moss

    Do people even understand how fossil fuels are used in every day life?? I highly doubt it. The media and liberals has manipulated this conversation so much it is almost impossible to talk about. Human life is so further along because of fossil fuels.

    You think the average 20 something even knows where plastic comes from?

    • Wayne Andrews

      Very good point Fred! Ziplock sandwich bags, plastic wrap, tupperware, garden hose, mud flaps, keyboards, telephones, jugs, caps, extension cords, insulators, household wire, siding, floor tile and on and on.
      I work a ton of hours every week and I find it very strange the time periods people comment on these threads.
      My question for the elite are:
      Are you on the payroll?
      Do you hold a job?
      Do you fully pay for your retirement?
      Does your employer purchase any petroleum products?
      BTW, I am on lunch hour now.

    • Kathy Nelson

      Fred, here is a link to a 12 page (partial) list of everyday items that are made from oil:

    • Kathy Nelson

      Fred, here is a link to a 12 page (partial) list of everyday items that are made from oil:

      There must be a more complete list out there.

  • Oscar Lafrenniere

    Would someone please think of the children!

    What good is money when the earth is dying?

    Divest NOW!

    BERNIE 2016

  • Instead of attempting to take Vermont retirees’ pension plan political hostage for a very uncertain outcome, maybe Hillary Clinton’s ride this week from Iowa to New Hampshire on a private jet that burns about 350 gallons of fossil fuel per hour should be the concern.

    This is the very same Hillary Clinton who refuses to state her position on the Keystone Pipeline.

    Seems like the fossil fuel divestors would do better focusing on getting Hillary to ride around in a Chevy Volt and leveling with the people on the Keystone Pipeline issue.

    • Glenn Thompson

      I watched the news clip when Hillary was asked her position on the Keystone Pipeline? Either we have to read her mind, or wait until she is elected president for that answer? I’m no Bernie fan for sure….but at least he won’t give a response as pathetic as that!

  • Glenn Thompson

    How did the 50 Climate Change Activists make it to Monpelier????

    Horse and Buggy?

    If they used fossil fuels…then they are wasting energy and come across looking like Hypocrites!

    • Dave Dempsey

      Great point. If all the advocates for divestment of fossil fuel investments in the country who can afford to buy electric vehicles, only use power generated by carbon free renewable energy sources and stop traveling by air and limit all other uses of fossil fuels, divestment would be unnecessary. Fossil fuel companies would not be as profitable and return on investment wouldn’t be as attractive. The problem is that most people can’t afford to do these things and rely on fossil fuels to get to work and heat their houses, trailers and apartments.

  • Edward Stanak

    Below is my full written statement on divestment that was prefiled with VPIC .

    July 27, 2015

    Stephen Rauh, Chair
    Vermont Pension Investment Committee (VPIC)
    109 State Street
    Montpelier Vermont 05609-6200

    RE: Pension Funds , Divestment and Environmental, Social and Governance
    Initiatives Policy ( ESG )

    Dear Chair Rauh and Members of the Vermont Pension Investment Committee :

    I am a member and beneficiary of VSERS. I write with respect to the VPIC decision making process concerning divestment from fossil fuel industries . My specific concern is the clear likelihood of substantial undue adverse effects on the retirement fund if divestment is not pursued in a gradual but methodical manner.

    I have reviewed the VPIC ESG policy as well as publicly available VPIC meeting minutes. It seems evident that the scope of the July 28, 2015 VPIC meeting will include consideration of the Treasurer staff report on holdings in the coal industry as well as a general re-examination of the issue of divestment from the fossil fuel industries.

    A comprehensive “up and down” vote on divestment ( coal, gas and oil) does not seem advisable or prudent at this time . Absent a thorough consideration of impacts on the retirement fund that will result by not divesting – in light of the growing body of data and analyses available on both the environmental and health impacts of climate change and the reasonably foreseeable dire financial effects – VPIC would appear to be moving to a premature comprehensive decision on divestment without having taken appropriate steps for informed decision making.

    A reasonable person may conclude that continued investments in fossil fuel industries- despite the high rates of return in the short term – represent a threat to the stability and long term security of the fund. Without consideration of empirical data and analyses that evaluate and factor in stranded assets , VPIC cannot make an informed decision on divestment. A less than informed decision would appear to breach the fiduciary responsibility of VPIC to the beneficiaries pursuant to the provisions of 3 VSA Chapter 17 and be inconsistent with the statutory provisions of the “prudent investor rule” as set out in 14A VSA 902.

    It is a question of what VPIC perceives as the applicable standard of foresight and acceptable levels of risk for public investment systems. *

    I request that VPIC not have an “up and down” vote on divestment at its July 28th meeting. As an alternative, I suggest that VPIC form a committee to revisit and amend its ESG policy with specific consideration to be given to the unique and unprecedented long term effects on market forces from climate change – such as the “carbon bubble” and anticipated stranded assets . Following the amendment of the ESG policy, VPIC should then request a report that fully explicates the potential for long term undue adverse impacts on the fund from reasonably foreseeable stranded assets. “Constructive engagement” under the current ESG policy is a well-intentioned but failed strategy to influence the fossil fuel industries . Divestment is the sound course to be followed in safeguarding the economic security of the tens of thousands of beneficiaries whose fate lies in the hands of VPIC.

    In closing, VPIC members may find of interest a February 2015 report by the Union of Concerned Scientists entitled “ Stormy Seas, Rising Risks: What Investors Should Know About Climate Change Impacts At Oil Refineries” ( noting particularly chapter 3 in the report wherein recommendations are framed for the SEC and investors) . The report may be found at . I cite the UCS report as but one example of many studies published since the adoption of the ESG policy in 2013.


    Ed Stanak

    * Some beneficiaries of the fund believe that the “housing bubble” burst of 2008 could have been, and in fact was, foreseen by some financial analysts and economists . However, it seems that VPIC’s professional advisors and staff did not give credence to such warnings in their advice to VPIC and the results were detrimental to the fund. Now, as Yogi Berra would counsel, we face “déjà vu all over again” as the carbon bubble” expands and the pension fund is once more in material jeopardy .

  • Ed Letourneau

    All the people who want divestment for the state pension funds — should be required to sign up for the extra taxes that will be needed if money is lost!

  • Peter Everett

    I am concerned about climate change as much as the politicians are about the $18 TRILLION (and growing) debt that they are leaving future generations…none. Both they and I will be long gone before payment comes due. They created the financial damage, and they don’t give a damn because they will be work food in the next decade or two. They know they created it, yet, they want to do nothing but increase this debt. Why should they care, they won’t have to repay it…our kids and grandkids are going to be stuck footing the bill. By the way, it will never be paid off. It is almost a certainty that it is far too high to realistically go down.
    Same for global warming (climate change) world population is far to high to satisfactorily sustain present standards.
    I we lived as they did 2 hundred years ago, maybe climate change wouldn’t be the same. As for me, I look at the history of the earth and I cyclical warming and cooling throughout history. Maybe we are entering another warming cycle that humans can do nothing about. Does fossils fuels give off greenhouse gas? Possibly so. Do 8+ billion people give off greenhouse gas (even after death when decomposing)? Possibly so.
    Is there an easy or definitive answer to the problem? Many say fossil fuels is the culprit (although not everyone use the fuels the same way). I say overpopulation may have just as much of an effect, because we all expelling CO2 at roughly the same rate. What is your solution to this form of problem? Do you cut back on people? If so, how? I’m sure government will find the proper solution to this. Just ask Dr Ezekiel Emanual, I’m sure he has the answer to this and your president, most definitely will go along with the solution if it only involves those who disagree with him.

  • Dan Carver

    The best approach is for the Divestment Supporters to petition current and future State’s employees and teachers to accept a significantly lower pension value, and if they agree, then pensioners could demand the VPIC to divest.

    Good luck with that!

  • sandra bettis

    Whose pocket is this board in?

  • Steve McKenzie

    Why are the divestment proponents limiting their demands to only targeting fossil fuel companies?

    If their objective is to drive change via investment choices, why are they not also demanding divestment from companies whose products and/or services actually generate the stated harmful product (CO2)?

    Per, in 2013 “transportation” and “industry” (manufacturing) accounted for a combined 48% of CO2 emissions.

    Why is there no demand to divest from companies such as GM, Ford, Delta, United Airlines, Boeing, United Technologies, GE, IBM, Dow Chemical, UPS, FedEx, Caterpillar, Deere, etc?

    If the divestment proponents position is that divestment ultimately drives corporate behavior, then would not changing the behavior of these and other CO2 generators be as valuable to their goal as only focusing on fossil fuel companies?

    There must be a good reason, I’m sure…

  • Dave Bellini

    A logical decision. Many of the politically correct folks are not vested in the pension system. If it loses money….THEIR…future is not impacted. THEY HAVE “NO SKIN IN THE GAME.” It’s not their risk. They have no standing. If 350,org wants to make up any funds lost by divestment let them put THEIR money where their mouth is. Not likely. They are the vocal minority that seem to have loads of free time during the week.

    • ed stanak

      Read my prefiled comments above to VPIC. The issue for the beneficiaries of these retirement funds ( To conservative commentators worried about effects of divestment on tax payers: rest easy, in the current and foreseeable political climate the VT legislature will NEVER increase the employer’s obligated contribution to the fund) is whether there has been any analysis of the potential undue adverse effect on the retirement fund from NOT divesting. That’s when we will get hosed by Wall Street. We are the ones with “standing ” on this issue and we had better become educated on the complex issues surrounding climate change effects on traditional market forces ( i.e. investments). It’s a new ball game: those banking on the historic rates of return from fossil fuel industry investments are in for an eventual rude awakening. Putting it another way, if you liked the effects of the Housing Bubble on the retirement fund, you’ll love the Carbon Bubble. Ed

  • Divestment,cute and cozy. The war machine
    roars ahead and people are distracted by Rockefeller`s/Wall Street`s Mckibben`s dog and pony show.
    Anybody else find it ironic Mckibben says nary a word(if at all) about perpetual wars for oil/profit and US/corporate world hegemony? There is no irony, in context,because he is wall street`s co opted boy.
    Anybody else connect the dots?

    Divestment lowers oil stock prices making it easier to reclaim them.
    S African divestment was a vastly dissimilar dynamic.

    And(because) divestment will not touch at least 75% of the planet`s oil reserves. Unless one is capable of shaming the owners into submission.

    WSJ ” Name the biggest oil company in the world. ExxonMobil? British Petroleum? Royal Dutch Shell? In fact, the 13 largest energy companies on Earth, measured by the reserves they control, are now owned and operated by governments. Saudi Aramco, Gazprom (Russia), China National Petroleum Corp., National Iranian Oil Co., Petróleos de Venezuela, Petrobras (Brazil) and Petronas (Malaysia) are all larger than ExxonMobil, the largest of the multinationals. Collectively, multinational oil companies produce just 10% of the world’s oil and gas reserves. State-owned companies now control more than 75% of all crude oil production.”

    So hooray for solar panels and windmills,well because, just coincidentally, Rockefeller Brothers fund are invested in RE.
    hmm makes one wonder.

  • ray giroux

    The “petro dollar” –

    Has anyone been paying attention? Our fiat currency is no longer backed by gold or silver – it is backed by oil.

  • Paul Richards

    The much larger question is why are we funding these lavish pension plans for public sector unions while the rest of us are stuck with government mandated Social Security???????! We are forced to pay for these 2 plans which we have no choice in. This is tyranny.
    We can solve the whole problem very easily by ending these golden, exclusive giveaways set aside for public sector unions and by letting them buy their own plans if they want them. Then they can decide where they want to invest. Until that happens they should have no say in the matter.

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