Editor’s note: This commentary is by Marie Leotta, of Waitsfield, who was a candidate for the Vermont Legislature in 2016.In 2016, Vermont became the battleground state for the divestment movement as activists called on the Vermont pension to sell off all fossil fuel holdings. But time and time again, public discourse on fossil fuel divestment has led to Vermont pensioners and portfolio managers drawing the same conclusion: Divestment is a bad practice for Vermont.
In March, after careful deliberation and analysis from legislators, economists and pension fund stakeholders, the Vermont Senate Government Operations Committee decided against holding a vote to force the state retirement funds to divest. The House similarly walked away from enforcing a state-mandated divestment just one month prior.
Those who are still insisting on pension divestment despite all the legislative pushback are missing the larger point: Divestment has no tangible impact on reducing carbon emissions but could have an enormous negative financial impact on the pension and the retirees who depend on it. The state treasurer’s office calculated fossil fuel divestment would cost retirees $10 million per year in lost returns and $8.5 million in implementation fees.
Divestment has no tangible impact on reducing carbon emissions but could have an enormous negative financial impact on the pension and the retirees who depend on it.
Not only would divestment risk the livelihoods of plan beneficiaries, but the state treasurer’s office also noted that the high costs that accompany divestment would violate the “Exclusive Benefit Rule” which states that trustees must act for the exclusive benefit of the plan’s beneficiaries.
This is why Treasurer Beth Pearce has been saying for years that divestment is “counter to our fiduciary responsibilities to the fund and its beneficiaries” and called it a “bad practice.” And she is not alone. The manager of California’s state teachers’ pension, Chris Ailman, has also noted the negative costs to the pension, saying, “I’ve been involved in five divestments for our fund. All five of them we’ve lost money and all five of them have not brought about social change.”
But what do the pensioners themselves have to say about divesting their funds? Earlier this year no less than five different groups representing state employees and Vermont retirees submitted resolutions to the Vermont Senate Committee on Operations calling for the Vermont Pension Investment Committee to maintain fiduciary responsibility in making “prudent investment decisions.”
Whatever one’s views on climate change, let’s not risk pensioners’ livelihoods on a purely symbolic campaign. The fact is our society and economy still uses fossil fuels and whether or not our pension fund owns stock in these companies will have no impact on overall use of fossil fuels. Vermont needs practical solutions that actually help Vermonters.