Dan DeWalt: A word from teachers on divestment

Editor’s note: This commentary is by Dan DeWalt, an artisan and activist interested in democracy and the Constitution. He writes from South Newfane.

When Gov. Shumlin took up this divestment lance this year, it came as rather a surprise to unaware Vermont state pension investees to learn that some of their retirement funds were presently invested in the fossil fuel industry. I teach part time at Leland and Gray Union High School. I asked the teachers there about their reactions to the divestment controversy. News flash – teachers have no time to keep track of where their retirement savings are being invested. They are working overtime just to keep up with all of the work that their jobs demand. They were universally surprised to learn about their possible unwitting economic participation in the fossil fuels industry. After the surprise passed, the most prevalent response to the investment question was “I hope you’re kidding.” Most couldn’t even take seriously the idea that we would invest Vermont dollars into something that belied Vermont values in such an egregious fashion. Plenty of these teachers want their retirement money to be invested well and to grow in value for them. But no one saw how the oil and coal investments would even make sense.

I presented the following letter to them, and, after consideration, without a single objection, they endorsed it and agreed to have it disseminated.

Dear Treasurer Pearce,

We are pleased that you and Gov. Shumlin have reached a compromise that has stopped the Legislature from interfering with your fiduciary decisions regarding pension investments. We agree that this is your bailiwick and not the Legislature’s.

However, we are deeply disappointed with your decision to keep our pension money invested in fossil fuel stocks which contribute directly to destroying our planet.

While there are those in America who may value profits over all else, that is not the case among Vermont’s professional educators.

 

According to VTDigger, you opposed divestment “because it introduced factors other than ““fiduciary responsibility”” into the process of making investment decisions.” This seems to indicate that you believe that those of us invested in the Vermont state pension system place value on money only and want to maximize our gain no matter what the cost to society. That is a rather large leap of faith on your part and you have shown no proof that this adequately reflects our values and wishes.

The Vermont NEA has a policy that all pension funds should be invested in a socially responsible manner. Destruction of the planet, as practiced by mining, fracking and burning of fossil fuels is the very definition of not being socially responsible. So your investment strategy flies in the face of the statewide teacher’s union that you are supposed to be representing with your investment decisions.

While there are those in America who may value profits over all else, that is not the case among Vermont’s professional educators. Our very choice of work shows that we value service to our children and their future far more than we value a fat paycheck for ourselves. To learn that our retirement investments are directly countering the values that guide our teaching and our lives is an affront to our professionalism and to our character as citizens of the planet.

It’s not credible to create a commission to study the issue — to see if we can survive a possible loss of a few investment dollars in the short term — but don’t balance that possible loss against the certain costs to our economy and our environment that will be incurred if we continue to support the fossil fuel industry. Even if you recognize only monetary value, you surely must be cognizant that poisoned air, poisoned water, increases in CO2 emissions and the now common severe weather events that are part and parcel of fossil fuel induced climate change are already exacting high monetary costs on our economy. Those costs will only increase with time. Your concern for our short term savings will be more than offset by the increased costs that we are already facing and will continue to face in our retirement as society suffers from our assault on the planet.

You have successfully defended your office and its right to make investment decisions. Now it’s time for you to do the right thing and divest completely and irrevocably from fossil fuels industries. You are the treasurer for Vermont. Please make us proud, not shamed by the tenets that underlie your investment strategies.

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  • Jay Eshelman

    Question: If the State’s Teachers’ Retirement Fund divests of certain investments, and the fund’s assets fail to appreciate sufficiently to cover its scheduled retirement benefit obligations, do the teachers who required the divestment agree to accept the commensurate decrease in benefits?

    • Dan DeWaltt

      I think that the letter makes the case that many of us would, seeing the long term savings. And it’s likely that any (if there is any) improved return on fossil fuel stocks could cost us in helth care dollars, infrastructure dollars and numerous other ways.

      • Jay Eshelman

        If you and others see savings Mr. Dewaltt, then why not accept some responsibility for your vision. If it’s as beneficial as you think it is, you’ll be laughing all the way to the bank…..and I’ll be happy for your success. But please don’t ask me to accept responsibility for your investment strategy, unless of course, you’ll return the favor and guaranty a rate of return on my personal investments, paltry as they may be.

  • David Usher

    Just as the fiduciary responsibility for the teachers retirement fund investment ortfolio should not be in the Legislature’s bailiwick, neither should it be in the teachers’. The Treasurer is responsible.

    • Jay Eshelman

      So, the short answer, then, is ‘no’. The VTNEA and its teacher’s are not willing to accept any responsibility for their investment policies and recommendations as long as Vermont taxpayers are on the hook.

      I hope the State Treasurer understands the office’s fiduciary responsibility to Vermont’s taxpayers in this regard. If the VTNEA and its teacher’s disagree with the Treasurer’s investment strategy, they should assume the same risk as taxpayers, invest their own money as they see fit and accept responsibility for doing so.

  • Tom Grout

    I assume the best teacher porfolio would be that of Crayola crayons or carnival cruise lines?

  • The DeWalt polling of teachers looks to be about the same as the Castleton polling that a few years ago indicated that a vast majority of Vermonters wanted industrial wind developments in their communities.

  • Paul Richards

    71 The best and most nondiscriminatory way to resolve this is to put the control and responsibility of the teachers’ pension plan solely in their control and get the rest of the tax payers out of it completely. The rest of us are solely responsible for arranging for and funding any pension plans we might have except for Social Security of course which is nothing but a Ponzi scheme forced on us. Why are we responsible for ANY part of any pension plans the teachers might have? It’s discriminatory and unconstitutional for us to be forced to pay for and/or manage any pension plans whatsoever for the teachers. If Social Security is good enough for me it is good enought for them. Let’s stop this ridiculous fleecing.

  • Glenn Thompson

    Here we go again!!!!! Someone else jumping on the diverse from fossil fuels bandwagon! Mr. Dewalt states this. “teachers have no time to keep track of where their retirement savings are being invested.” I’m assuming Mr. Dewalt also doesn’t have the time to follow or understand his own investments…..otherwise he would have never written this piece?

    Not only on VtDigger, but other sites I continue to read this common comment. “We should diverse from fossil fuel stocks and invest in Green Energy stocks.”

    Well, lets take an example and run the numbers. I’m picking Exxon/Mobil since that company is constantly getting bashed. On the other side of the coin, lets pick one of the largest Green Energy companies out there. SunEdision!

    Using a hypothetical, as of the first of the year, lets suppose the Vt. Pension fund has $1 million dollars to invest. To clarify my point of view, I would never encourage Pensions, IRAs, nor 401k’s be invested in individual stocks. I would prefer mutual and bond funds with a low to medium risk factor.

    With that being said…lets continue with the comparison. As of the first of the year Exxon/Mobil was $77.46/share. That stock closed today $83.16. Add in a $9,400+ dividend paid out on Feb 9th, the overall value currently for Exxon/Mobil = $1,083,000

    Using the same date of the first of the year 2016, the value of SunEdison stock was $5.75/share. That stock today closed @ $.21/share which works out to a current value of $36,521. And NO, I did not leave out a digit. Your $1,000,000 investment is now worth $36,521.

    Now the question becomes for all you people in the State of Vermont Pension fund, do you want the Dan DeWalts of the world to control your pension, or should those decisions be best left to Beth Pearce and professional money managers to make investment decisions? I feel real fortunate, that my retirement nest egg and pension is controlled by professional money managers and myself.

    I emphasize again!!!! Decisions on important investments such as pensions should be left to Professional money managers. The rest of you…..STAY OUT OF IT!!!!!

    • Paul Richards

      Lets resolve ALL of the issues surrounding this subject by giving complete control and responsibility of the investments, the plan and the funding of the plan to the employees. Why are we even involved in the first place? Why are we forced to provide these elite plans? Are these people members of some entitled class that the rest of us must support against our will?

    • John Greenberg

      Glenn Thompson:

      Your comment suffers from a variety of methodological inadequacies and red herrings.

      First, you argue: “…. I continue to read this common comment. “We should diverse from fossil fuel stocks and invest in Green Energy stocks.” The fist part of this “common comment” is what you see all the time. The second appears rarely and is NOT a logical consequence of divestment.

      Those who want to divest from fossil fuels – like Dan DeWalt here – generally do NOT make any attempt to say how divested funds should be invested. Instead, they are content to leave that decision to investment professionals. That makes sense: the decision to sell one or more stocks (or bonds) is entirely separate from the decision to buy others. Indeed, it is perfectly plausible to sell the divested stocks and leave the money in cash or cash equivalents for a period of time.

      I will not deny that someone, somewhere may have added the notion of investing in “Green Energy stocks,” but that’s an idiosyncratic position, NOT the one agreed to by those managing trillions of dollars.

      Second, most of those who advocate divestment have NOT advocated that stocks must be sold immediately. The DECISION to divest and the actual sale of the stocks to be divested are two separate events, and they may well occur at different times. So the argument that a particular stock to be divested is temporarily oversold is a red herring. The point of divestment is that, OVER TIME, the portfolio will no longer contain certain kinds of stock. In other words, divestment decisions have nothing to do with market timing.

      Third, using any one example is totally specious. Anyone can pick a stock to divest which has a pretty good track record and then compare it to a stock which has a dismal one. It’s also possible to do precisely the opposite. (See http://vtdigger.org/2016/03/19/vpic-chair-casts-doubt-on-divestment/#comments for an example of both in a comment by Jan Van Eck and my response)

      This is a discussion about stock PORTFOLIOS. The financial question is whether the portfolio as a whole would perform better or worse if it includes the stocks subject to divestment or whether it’s invested differently.

      Fourth, any such decision is complicated by the fact that the choice of dates is usually arbitrary. For example, in your comment, you look at the two stocks you compare as of the first of the year and then on the date of your comment. What’s special about those 2 dates? Anyone with experience of reading financial literature knows that performance can vary ENORMOUSLY merely by choosing different starting and ending dates.

      Indeed, that’s part of the reason that some advocates FOR divestment claim that portfolios would have performed significantly better without the fossil fuel stocks: they choose the point at which these stocks began to fall, then a date closer to the present and conclude that these stocks are losers. Expanding the record to a longer period of time would almost certainly reduce or even eliminate the so-called loss from being invested in fossil fuels. After all, for many decades, fossil fuel companies clearly WERE highly profitable investments. (Whether they will continue to be so is another question.)

      Finally, your argument about leaving “Decisions on important investments such as pensions … to Professional money managers” again misses the point. It is completely possible to leave the investment decisions to professionals, while directing them to comply with certain standards.

      Most money managers do that all the time anyway. A professional may buy highly speculative stocks for her own accounts, for example, but refuse to do so when acting as a fiduciary for others.

      To conclude with an example much closer to the issue before us here, take the example of “socially responsible” mutual funds. They are managed by professionals, just as other mutual funds are. But instead of investing in just any stocks, they use screens to eliminate whatever the fund’s defining documents consider NOT socially responsible. The definition varies enormously between funds: some screen for gambling; others for nuclear power, still others for fossil fuels, etc.

      There is, in short, absolutely no reason why a fund can’t be professionally invested and managed AND screened to eliminate fossil fuel stocks. Indeed, there are billions of dollars invested precisely that way already.

      • Glenn Thompson

        John Greenberg states,

        “For example, in your comment, you look at the two stocks you compare as of the first of the year and then on the date of your comment. What’s special about those 2 dates?”

        Nothing is special about those dates. If you don’t like them, go into any website that lists stock prices and shows graphs and pick your own dates! I could have used the date when SunEdison reached its high and that $1 million investment would have been worth $6,535 using yesterday’s closing numbers. Does that work better for you?

        You go on to state.

        “Finally, your argument about leaving “Decisions on important investments such as pensions … to Professional money managers” again misses the point. It is completely possible to leave the investment decisions to professionals, while directing them to comply with certain standards.”

        That statement really irritated me. FYI, I’ve been doing this investment gig for a long time. Investing is one of my hobbies. I certainly wasn’t able to retire at the age of 62 due to being overpaid by my employer. How I reached my financial goals….you figure it out. Nothing galls me more than having outside ‘entities’ including politicians, special interest groups, and others who believes they are entitled to dictated to me, my financial adviser, my stock broker, and my financial institutions….how my money is to be invested and what investments are to be allowed.

        I’ll give you the same advise that I gave to Mr. DeWalt. When it comes to *OTHER’S* pensions, 401ks, and IRAs……STAY OUT OF IT!!!

        • John Greenberg

          Glenn Thompson:

          “Nothing is special about those dates. If you don’t like them, go into any website that lists stock prices and shows graphs and pick your own dates!”

          Ok. Let’s do that. I pick June 5, 2012 as the start date and June 23, 2015 as the end date. On the start date, SunEdison stock (SUNE) was selling at $1.54 and Exxon (XOM) for $69.99. On the end date, SunEdison was selling for $32.13 and Exxon for 78.98. I’ll let you do the math, but even accounting for Exxon’s dividends, it’s pretty clear which one was the better investment.

          I don’t offer these dates as a better model than yours because my dates were chosen solely to make the point they make, but merely to underscore my initial point: namely that it’s pretty easy to rig comparisons if you’re free to choose the time frame retroactively. I also note that it is portfolios, not individual stocks (and especially not individual stocks which have virtually nothing in common) which need to be compared.

          I too have several decades of investing experience including as a fiduciary for others, for what that’s worth, so to be perfectly blunt, I’m really not interested in your advice.

          I AM interested in making sure that the debate over divestment concerns real issues, rather than the spurious ones your comments raise. Since the issue concerns funds invested by the State of Vermont, divestment has no bearing on you, your financial advisor, your stock broker, or your financial institutions, or anyone’s 401ks and IRAs. All of you are free to do just as you please, whether or not the State of Vermont pension fund divests or not.

          • James Tailor

            WE are the “state of Vt” and most certainly do have a vested interest in a publicly funded employees pension. The burden and risk could impact tax payers who would have less dollars to invest as we choose.

          • Glenn Thompson

            John Greenberg,

            I’m going to address your comments one last time and move on.

            If you wish to get into comparisons. For example, yesterday if you were a day trader sitting in front of a computer, you could have made a bundle of money on SunEdison since it traded between the $.21/share and by 3 pm had risen to $.40/share. However, if you left sitting in front of your computer after purchasing ‘x’ number of shares @ $.40/share and had to go walk the dog or something and came back, you would have lost money since SunEdison sold off strongly that last hour. I only mention this to show, investing is a form of gambling and can be a ‘crap shoot’ for those who don’t understand it. However, there are many investments where risks can be minimized.

            Here is the reality of the comparison of Exxon/Mobil to SunEdison. Exxon/Mobil is a solid company from an investor’s standpoint that has over time increased its dividend. If you spent an entire day pulling up the holdings of countless mutual funds….you will have learned Exxon/Mobil is listed in the holdings of a large number of these mutual funds.

            SunEdison on the other hand is now into ‘penny stock’ territory and most likely heading towards bankruptcy.

            My major point in commenting on this thread, is the desire of many to diverse from Fossil Fuels related stocks (and there are countless) and do it through legislative action. I’m vehemently opposed to any legislative body even attempting to write legislation that you have so kindly pointed out ….. “It is completely possible to leave the investment decisions to professionals, while directing them to comply with certain standards.” … which can be interpreted that lawmakers should be allowed to ‘pick and choose’ what industries and what investments must be excluded from a specific fund including the Vermont Pension fund.

            If you open up a crack to that door, you end up opening up the floodgates, and then the question becomes what other industries and investments will become offensive to the “we must control everything” crowd?

            Bottom line John, diversification accomplishes absolutely nothing. It will not impact stock prices, a company’s performance, and certainly will not impact the climate. Such foolishness must be soundly rejected.

          • John Greenberg

            Glenn Thompson:

            You make 3 points here:

            1) You quite properly observe that Exxon/Mobil and SunEdison are not at all comparable companies. I agree entirely. Even when SunEdison was not a penny stock and NOT headed towards bankruptcy, it was not in any way comparable to one of the largest companies in the world. But YOU are the one who made the ludicrous comparison in the first place, and then tried to stick with it. So I thank you for hopefully ending this fruitless part of the discussion.

            2) “If you open up a crack to that door, you end up opening up the floodgates, and then the question becomes what other industries and investments will become offensive to the “we must control everything” crowd?” That’s a real issue.

            It’s been pointed out by those favoring divestment that the State of Vermont has already crossed that line (South Africa and, I think, other previous instances). Still, it’s a valid question, especially in this context where the State is acting as a fiduciary for people whose interests may not coincide in any way with the State’s (a very abstract way of noting that I agree that the issue of fiduciary responsibility is pretty important here).

            3) Divestment (you said “diversification,” but I’m sure you meant divestment) “accomplishes absolutely nothing. It will not impact stock prices, a company’s performance, and certainly will not impact the climate.” That, in my view is the core of the issue. In truth, I am closer to agreeing with you than my comments have implied.

            I don’t think divestment accomplishes “nothing,” but I fear it doesn’t accomplish very much at all in most instances, beyond making those divest feel more morally pure. And in cases like this one, it requires a lot of activist work and energy. In my view, that work and energy would be better spent elsewhere.

            Similarly, in order to impact “stock prices” or “a company’s performance,” the divestment must be extraordinarily large, worldwide and representative of a pretty overwhelming global consensus. Simply put, if enough of the market divests, there WILL be an impact on stock prices and there WILL be a response from almost every management in terms of their company’s performance.

            A company’s management, to spell this out more clearly, is supposed to be representing the interests of the company’s shareholders. If people are boycotting its products or its stock, that’s clearly NOT in the shareholders’ interests: management should and very likely will react.

            That was the case with South Africa, for example: most of the world eventually came to view apartheid as abhorrent, and the divestment movement DID have an impact (by most accounts) on the apartheid government’s decision to release Mandela and negotiate a democratic transition.

            Finally, whether divestment will or “will not impact the climate” will depend entirely on whether managements of the companies being divested change course or not. If fossil fuel company managements begin to see themselves as being in the energy business, rather than just, e.g., the oil business, if they begin to invest in alternative forms of energy as potential sources of profit rather than exploring for oil that should never be removed from the earth, then the climate would be HUGELY impacted, especially if their competitors reach similar decisions.

            Unlike you, I do not find divestment abhorrent at all. I’m an activist by nature; I see bad things happening in the world, and I want to do what I can to change them. It’s clear to me that the motivations behind this divestment movement are well-meant and right-spirited. Accordingly, I am loathe to suggest that it’s not a very well-honed tool for accomplishing what I agree needs to be accomplished, though in truth, that’s what I really believe. Put positively, I believe there are far better ways of achieving what the divestment folks are trying to achieve: e.g. a significant tax on the externalities of burning fossil fuels.

            Now that you’ve “outted” me, I repeat what I said above: bad arguments deserve to be clarified and analyzed so that all can see what they are, and your previous arguments were, to be blunt, pretty awful, as I hope I showed above.

  • Dan DeWalts position on divestment is extreme. Dan states that: “Destruction of the planet, as practiced by mining, fracking and burning of fossil fuels is the very definition of not being socially responsible.” That would seem to apply to all schools and companies in Vermont, since if they use energy and materials, they are using fossil fuels.

    Except for the few very disciplined and commitmented people who choose to ride a bike or walk to school or work , most people drive using a fossil fuel burning car. Most students arrive at school either by a diesel bus or by gasoline powered car; after leaving a house heated by propane, fuel oil, or natural gas. By high school, students may go on school sponsored trips to Europe using jet fuel and many will fly to visit prospective colleges around the country.

    This divestment talk is silly. The fact is, most people are very highly invested in using fossil fuels in their daily lives for transportation, warmth, and recreation. Divestment does nothing, absolutely nothing to change that. It is an unproductive diversion.

  • James Tailor

    There needs to be a call for transparency among those advising others on their life savings. Are we to believe that Shumlin, who I am sure is an investor, is heavy in energy stocks? We know the man is a Millionaire. We have the right to know how he became one. I m no expert, but I think we all know a little about long term growth and buying low, selling high. A wealthy politician is telling us the opposite and jeopardizing hard working citizens financial security.

    • John Greenberg

      James Tailor:

      “… I think we all know a little about long term growth and buying low, selling high. A wealthy politician is telling us the opposite …”

      As I pointed out above, no one that I’ve heard or read is telling anyone WHEN to divest or at what price. This claim is spurious and unfair.

      • Douglas Hutchinson

        Mr. Greenberg,
        You might want to check out this link from VTDigger in February where the Governor is arguing that Fund managers should divest from coal and sell the Fund’s Exxon stock now. This sounds like a time frame to me.

        http://vtdigger.org/2016/02/24/shumlin-implores-panel-to-divest-from-coal-other-fossil-fuels/

        The relevant quote:

        “He urged the pension committee to pull out of coal and drop $200,000 in state Exxon Mobil stocks right away…”

        Divestment at least as contemplated here is at most symbolic and would have no effect on greenhouse gas but could have a substantial effect on fund growth if done imprudently.

        • John Greenberg

          Douglas Hutchinson:

          A few paragraphs after the quote you include, there is the following: “He told the committee it must act before the end of the legislative session,” which redefines “right away” to 3+ months from now for the INITIAL decision to divest. Once the committee acts, it isn’t clear that the actual sale of assets would necessarily take place the next day.

          I would also note that the governor is not always cautious in his choice of expressions, to put it generously.

          I read this article at the time it was published. Despite the phrase you quote, I did not interpret the governor’s message as one of haste, but rather one of moral imperative.

          However, if by “right away,” the governor really meant “tomorrow” or some similar time frame, then in my view he was unnecessarily introducing an issue into the discussion that rightfully has no place there. The time frame for global warming is decades; surely a few days delay would make no difference in that picture, when compared to the fact that, as various folks have pointed out, it could make a VERY consequential financial difference for retirees.

          I still believe what I wrote above: “most of those who advocate divestment have NOT advocated that stocks must be sold immediately. The DECISION to divest and the actual sale of the stocks to be divested are two separate events, and they may well occur at different times.” If the governor is not included in that “most,” then I disagree with him.

          I agree with you that divestment “could have a substantial effect on fund growth if done imprudently.” Therefore, to the extent I advocate divestment at all, I advocate that it be done prudently, and my argument above was intended to show that there is no reason why prudent divestment is impossible. Institutions do it regularly these days.

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