Marie Leotta: Fossil fuel divestment a bad practice for Vermont

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.

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  • Howard Ires

    When the markets lose faith in the fossil fuel industry it will be too late to divest, and that day is coming fast. Fossil fuels can’t survive in a world of electric cars, wind and solar power which gets cheaper by the day. I’m not in favor of legislating pension investment decisions, but in this case the legislature might very well be saving the Vermont Pension Investment Committee from it’s own lack of foresight.

    • Tom Grout

      Sir, obviously you need to research the meaning of mechanical torque. Electric usually doesnt overcome such a force or current battery storage capabilities. When an electric car or better yet a truck can stop on a steep grade and take off again effortlessly will your ideas even become reasonable.
      What you also fail to mention is these large oil companies will simply morph their way into an emerging field. I would rather own a future Exxon electric division than grandpa’s backyard solar array.

      • Kevin Jenkins

        Back to EV basics: 100% of the torque is available from zero rpms. There is instant maximum force the instant you touch the accelerator. combustion engines at say 1000 rims (near idle) have only about 30% of torque available. Then the when you do hit the gas, the torque is not linear, so you need a gear box to deal with the mechanics. This type of engineering is over 100 years old. Seems odd you are lobbying for 100 yr old inefficient tech that is, noisy, smelly, toxic, and increasingly expensive.

    • I agree. Also worth noting: the numbers show that if Vermont had already divested, the pension fund would be in better shape because of the dive in oil company stocks.

  • Bob Zeliff

    Unfortunately, in the short term fossil fuel company stocks will do very well under the Trump administration.
    Soon the past rules limiting the exports of fossil fuels will be lifted. The surplus we have in oil and natural gas due largely to the productivity of fracking will be shared on the world market. World prices of will drive up the cost for Vermonters (all Americans) of fuel to the world price. Great for oil company stock holders….yes our pension funds too.

    However in the long term the demise of fossil fuel are recognized by the leading oil producers. Note the Saudi’s have a long term plan to move from being dependent on oil, the Emerite are making those moves now….the own Global Foundrys …in our own back yard.

    • Howard Ires

      export fossil fuels? to where? Europe is way ahead of us. They are investing in renewables as fast as they can, and Germany has already made firm plans to phase out internal combustion engines. The very brief Age of Oil coming to an end.
      Our oil poured into the world market will just depress worldwide prices further and faster. Oil producing nations are pumping the stuff out as fast as they can because they know in 25 years it will be virtually worthless.

  • Paul Richards

    There is no good reason why anyone but the pension plan holders should have anything to do with the plans investments or the associated costs. These are discriminatory plans that the taxpayers are forced to support. While we struggle to provide for our own families, these public sector unions members enjoy their elite pension plans along with all of their other perks like early retirement, gold medical plans, multiple annual raises, tuition and travel reimbursement, paid time off and “work rules” to name a few.
    If social security is good enough for me it’s good enough for them. Time to cut the tie and let them take complete control of all funding related to their discriminatory plans and live a little bit like the rest of us.

    • Arthur Hamlin

      Paul, I’ve seen your anti-public worker rants on numerous articles on Digger. You have yet to explain or prove how public employee pensions are “discriminatory”. Maybe you are not aware that public employees contribute substantially to their retirement plans, or that the vast majority retired Vermont public workers stay right here in Vermont contributing to the economy after they retire. Vermont’s public pensions are actually very modest in fact, and compared to most other public pensions you might have heard about on the news.

      • Dave Bellini

        Arthur- I think some of the characters on here are not using their real names and are making stuff up.

      • Paul Richards

        You can call it what you want but when I am forced against my will to contribute to an elite, additional pension plan and pay for its management solely for public sector union members I’m being discriminated against. Because these people “stay right here in Vermont contributing to the economy after they retire” and their pensions are actually very modest compared to most other pensions has NOTHING to do with the argument. By your way of thinking, because the rest of us forced into supporting this scheme struggle to provide for our families but stay in Vermont in retirement and get less from Social Security because we made less than most others we should get an additional pension plan largely paid for by someone else. Where is the logic?
        Those of us not in on the receiving end of the scheme are being discriminated against pure and simple. If Social Security is good enough for the rest of us it’s good enough for them. What makes them entitled? Are they better than the rest of us?

  • You’ve Got the Wrong Side Up

    Fossil fuel companies are on the decline, and prudent investors are leaving them behind. Keeping investments in fossil fuels will only bankrupt the State’s pension fund over the long term. See this article: “With a record $1.4 trillion in sustainability assets, investors bail on fossil fuels.”

    • “As Pete Grannis, deputy controller at the $185-billion New York State public pension fund, said at an investor side event at the recent international climate talks in Marrakech, ‘The die has been cast, there is no turning back.’ “

    • Tom Grout

      When I start seeing longer lines at battery providers like Advance Auto than I do at the gas pumps then it might start to convince me. Until then your flying paper airplanes into the wind.

      • Rick Barstow

        By then it will be too late and fossil fuel stocks will be worth as much as the paper airplanes you refer to.

  • Why would anyone continue to invest in an energy source that is only getting more expensive and dangerous for our planet? Investing in fossil fuels in 2017 is about as good of an idea as buying a bunch of real estate in 2007.

    • Two trends mean that fossil fuels reserves are overvalued: 1. Increasing understanding of carbon mathematics that show that global warming will reach 5C level if current reserves are exploited and burned and 2. the learning curve effect on energy prices as solar, wind and EV units increase – if offered cheaper energy consumers will shift and investors will sour on fossil while scrambling into the new energy market.

      If you remove unexploitable reserves from the valuations of big oil their share prices drop 40-50%, but only long term investors see this. Oil is about 8% of most portfolios and research shows that divestment of that 8% has limited effect on total long term returns. Even the Rockefellers have divested from fossil and they founded Exxon.

  • Will divestment not affect carbon emissions? Well, did the campaign vs. Big Tobacco affect smoking? Of course it did. Divestment stigmatizes the growing use of fossil fuel and puts our money to work investing in better, cleaner places.

    A couple other points:

    “Exclusive Benefit” isnot the only critereon here. The VPIC guidelines clearly allow divestment and it’s been done here before. Vermont has divested out of apartheid South Africa, Sudan and (at the direction of Republic then-Gov. Jim Douglas) tobacco stocks.

    The train has left the station on this one. VPIC should and I believe will act to move Vermont toward a low-carbon future.

    And BTW, it’s simply inaccurate to say divestment would “risk the livelihoods of beneficiaries.” This is about their retirement, not their current livelihoods. People who write about this topic should try to get their basic facts right and show us they understand the financial issue that are involved.

  • John Zuppa

    When investments are made in BP, Exxon (mostly oil) or even Iberdrola of Spain (natural gas) the investment is in the CORPORATION or COMPANY if you will….not just their fossil fuels…

    BP etc. are heavily investing and developing in all forms of renewable energy as are the Emirates etc. (Qatar practically owns Iberdrola (and its’ world-wide Industrial Wind projects)…

    They are all shifting their focus as the changing times dictate….and I don’t see anyone working with them dumping their stocks…

    Move slowly and benefit from both sides of this “shift”…

  • Chuck Lacy

    Under this logic Vermont should reinvest in tobacco stocks. Do you also suggest that?

  • Depending on which stocks the fund owns and when they bought them, they could be sitting on losses. Perhaps that’s what the naysayers are looking at. As we look at the solar and electric storage technological improvements, it seems hard to believe oil stocks are a good investment. Then there are the pipeline breaks, spills, and fires as existing infrastructure ages, who’s paying for that?