Vermont’s Senate leader has called on State Treasurer Beth Pearce to reconsider her opposition to divesting state pensions from fossil fuel companies.
Sen. Tim Ashe, D/P-Chittenden, sent a letter to Pearce on Oct. 2 asking her office to reevaluate its position on fossil fuel divestment. Pearce has said eliminating coal, oil and gas investments in the state pension portfolio would increase risk and add costs.
Ashe tweeted the letter this week.
“I have always believed that investment decisions should be as free from political interference as possible for fear of turning the pension system into a political piñata,” he wrote in the letter.
“So I am asking you in your role as State Treasurer to reevaluate the factors that previously led you and your staff to reject divestment from fossil fuels to determine whether that historical judgment still stands.”
The state’s three pension funds manage a combined $4.4 billion, according to the most recent quarterly reports.
Ashe said his request was spurred by a recent decision by the state’s largest electric utility, Green Mountain Power, to completely divest its employee retirement account from fossil fuel companies by the end of next year.
Pearce maintains that the move would be too risky. A consultant hired in 2017 by a Vermont Pension Investment Committee subgroup to assess the impact of fossil fuel divestment on Vermont’s pension funds concluded that it was not in the best interest of state retirees given associated costs.
Ashe said that if GMP, a company steeped in energy industry trends, had concluded divestment was a financially responsible decision for their retirees, then “it really does merit a new look to see if the previous assumptions continue to hold” for the state’s pension.
Vermont lawmakers have the authority to require divestment. But Ashe emphasized the letter is not a threat that the Legislature will direct the Treasurer’s office to eliminate fossil fuels from the investment portfolio. He said it would be “concerning” to have pension investment decisions made by the Legislature.
“Every legislator might bring his or her view about what should be divested from and that could become very fast a process which has very little to do with the health of the pension systems and much more a battle of political ideas,” he said.
Ashe also asks the treasurer’s office for a status update on five alternatives to divestment Pearce proposed in a 2017 letter to the Vermont Pension Investment Committee. Pearce said in an emailed statement Thursday that VPIC is implementing that five-part plan and will release a report “on all environmental, social, and governance efforts” later this month.
Vermont’s pension funds are already severely underfunded, costing the state well over $100 million a year just to catch up on the old payments and debt service. Some point to historical underfunding, which peaked during the Howard Dean administration, for the problem. Others say Pearce is partly to blame for underperformance of investments under her watch.
Fossil fuel divestment advocates say cutting off money to companies still developing oil and gas infrastructure is necessary to address climate change. Some, including top asset managers for the University of California, also argue that it makes financial sense to divest from companies that own or are building pipelines and natural gas plants that could become so-called “stranded assets” as countries seek to aggressively reduce emissions.
The divestment movement has gained traction nationally in recent years. California lawmakers passed a law in 2015 requiring state pension managers to liquidate coal investments. Facing mounting pressure from students, Middlebury College announced plans to divest its $1 billion endowment earlier this year.
And the European Investment Bank, the largest public bank in the world, is no longer offering loans for coal and oil projects, although a similar measure for natural gas projects has been postponed.
But divestment as an emissions reductions tool has its skeptics.
“My feeling is that fossil fuel divestment actually accomplishes very little in terms of climate change,” said Samantha Gross, an energy and climate fellow at the Brookings Institute.
Gross said that as heating oil and gas have been hard to phase-out in the U.S., focusing on the demand rather than supply side could reduce emissions more.
And, noting that some energy companies that historically focused on fossil fuels have started to ramp up renewable energy development, she advocated for assessing individual company’s business strategies in the face of climate change rather than a more sweeping divestment approach.
She added that the coal industry, which is facing declining domestic consumption as coal power plants shutter, is one sector where full-on divestment could be wise.
Last year, Rep. Linda Joy Sullivan, D-Dorset, a certified public accountant, introduced a bill, H.352, that would require Pearce to divest the state’s pension from companies that devote more than a quarter of their operations to “carbon-based fuel endeavors.”
Sullivan said in an email Thursday that while she respects Pearce’s reticence to divest as someone who works in financial services, the Legislature needs to “act boldly” if it is serious about tackling climate change.
She added that divestment would send “a bold message far beyond our borders and is preferable to other ‘messaging’ measures — like carbon pricing — that would negatively impact many Vermonters without appreciably affecting our carbon footprint.”
