Firstly, divestment entails serious and immediate financial consequences for the $4.02 billion Vermont State Pension Fund and its 50,000 public sector beneficiaries. State Treasurer Beth Pearce understands this and has called for “a real assessment of the cost and benefits” of divestment. When the State Treasury studied divestment in November 2014 it found that costs to the state pension funds would include $10 million per year in lost returns and another $8.5 million in implementation fees. Clearly a well-diversified investment portfolio is better for Vermont’s pension beneficiaries.
Second, the mission statement of the Vermont Pension Investment Committee (VPIC) is to manage investments for the Vermont public pensions “with integrity, prudence, and skill to meet or exceed the financial objectives of the beneficiaries of the funds.” Given that mission, it would be imprudent, and violate fiduciary responsibility, to risk millions in returns to make a political point about fossil fuel use. In fact, the very reason the VPIC was set up is so that public funds could be stewarded by an independent body, not susceptible to political pressure and whims.
It’s clear that divestment makes little sense in terms of dollars and fiduciary duty, but it also fails on the environmental front, which is supposedly Shumlin’s motivation. Selling stock in fossil fuel companies will do nothing to lower greenhouse gas emissions or address climate change.
For starters, the handful of energy specific or company specific equities that would be sold off will be immediately bought by other market participants. Additionally, the proposal to divest from fossil fuel stocks takes the very limited view that suppliers of these fuels are to blame for climate change. But what about all of the companies, and individuals, that buy and use fossil fuels to power their production processes or to light their homes? By the logic of those calling for divestment we should also divest from any company that uses fossil fuel.
When pressured to divest the University of Vermont, my own alma mater, unanimously rejected divestment and made it clear that it is the university’s fiduciary responsibility to serve its faculty and students and divestment would pose a significant risk to financial returns. As many have pointed out, allowing legislators to insert their political agenda into the state’s retirement fund and use beneficiaries’ dollars to push ulterior motives, whether social or political, sets a bad precedent. Simply put, as Beth Pearce states, legislating divestment and investment decisions is simply not good investment policy. That’s why organizations like the Vermont Troopers’ Association, Vermont Retired State Employees Association (VRSEA), Vermont League of Cities and Towns and the Vermont State Employees Association (VSEA) have all passed resolutions calling for funds to be managed by VPIC in accordance with fiduciary responsibilities, not by the Legislature.
For the security and well-being of Vermont’s retirees we need to let our public financial managers do their jobs and not legislate investment decisions.
Representative Robert Bancroft (Chittenden-8-3)
I received this op-ed from Representative Bancroft, whom I have never met. I rarely write about divestment or things of that nature. However, my mother was a school teacher. I do not like the idea that state pension funds are being invested as a set of political statements, instead of being invested solely for the benefit of retirees. I decided to publish this op-ed, because I agree with it.