Editor’s note: This commentary is by Austin Robert Davis, who is policy and communications coordinator for 350Vermont.
[A]s an advocate for divestment, I am concerned by the deeply flawed analysis of the issue in the recent commentary by state Rep. Robert Bancoft of Chittenden 8-3. Rep. Bancroft’s portrayal of the subcommittee process, which my organization has been invited to engage in, clearly requires setting the record straight.
At the most recent gathering of the Vermont Pension Investment Committee (VPIC) subcommittee on divestment, four nationally and internationally recognized experts on fiduciary responsibility briefed the subcommittee members on the fiduciary risk of carbon-intensive investments. By and large, a conclusion was reached between the four experts and the members of the VPIC subcommittee that divestment may indeed be consistent with the fund’s fiduciary requirements. Of course, a thorough vetting process needs to be in place in instances such as this and advocates are working with the state treasurer and VPIC diligently to uphold that process in a manner that is fair, unbiased, and fiscally sound.
Adam M. Kasner of Domini Social Investments pointed out that Domini has excluded companies such as British Petroleum for risk related reasons. This practice was questioned by fellow investors until BP came under fire for their disastrous oil spill in the Gulf of Mexico. As fiduciaries, pension boards need to have a longitudinal approach that protects pensioners who have been vested in the system for years — as well as those just entering. This position is just one example of how divestment falls under the definition of fiduciary duty.
The committee also heard from other experts who conveyed that it is widely accepted that environmental and social governance decisions are material when making investment decisions — in fact, the culture of investment has changed so that environmental and social governance concerns are often indicative of asset volatility.
As fiduciaries, pension boards need to have a longitudinal approach that protects pensioners who have been vested in the system for years — as well as those just entering.
Furthermore, Rep. Bancroft misses the mark when it comes to Employee Retirement Income Security Act (ERISA). His quotes on the matter are limited and ignore important aspects of the changing definitions. At the end of 2015, the Department of Labor purposely revised their definition of fiduciary responsibility for ERISA. Department of Labor ERISA rules, which Labor Secretary Thomas Perez summarized in one simple statement: “all other factors being equal it’s perfectly acceptable for ERISA plan fiduciaries to consider the social impact of their investments.” By taking into accordance the changes in both global economics and investment strategy, environmental and social governance is now firmly ensconced within the umbrella of fiduciary responsibly.
Secondly, Rep Bancroft alleges that “fossil-fuel divestment would cost the Vermont state pension fund $10 million per year in lost returns and $8.5 million in transactional costs which can never be returned.” Again, Rep. Bancroft shows that he is behind the times here, as these numbers have consistently been refuted. The numbers that the representative cites are years old and from a study that follows through a hypothetical dumping of energy sector assets in an imprudent timeline, virtually overnight, a course of action that no one would advise. Typically, informed discussion around divestment involves the controlled shedding of risky energy investments over a window of time.
Finally, it is particularly interesting that Rep. Bancroft referenced the Fischel Report, a piece of “research” 100 percent funded by the Independent Petroleum Association of America. Divestment Facts, which is funded by the IPAA, has been a vocal advocate against divestment in Vermont, and has been present at every Vermont Pension Investment Committee meeting. The representative’s commentary includes a link to their website. IPAA’s study couches its arguments in hypothetical situations, based solely on timelines when fossil fuel investments were performing well, and does not take into consideration the changing market economy for fuel into a future of stricter regulations, rising global temperatures, and world-wide agreements to cut carbon usage.
With all due respect to the representative, and his training as an economist, it seems as though he is trying to assert an outcome before due diligence has been done. The state treasurer, labor leaders and advocates for divestment have come together to fully give divestment its due diligence.
As we build towards this consensus, I think we would all appreciate Rep. Bancroft’s participation should he choose to learn about the work currently being done in Vermont. Furthermore, I encourage readers to learn these things for themselves, by engaging in this issue with parties already in the discussion and the recently established public process as opposed to reading headlines.
As Vermonters our best works comes when we come together and build on what we can all agree we would like to see in the future, in this case, a healthy pension fund and livable planet for years to come.
