It's Deja Vu All Over Again in the Vermont Divestment Debate

It's Deja Vu All Over Again in the Vermont Divestment Debate

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Vermont’s state senate is considering a bill, S.28, to require the state’s pension managers to divest retirement holdings from the world’s 200 largest publicly traded fossil fuel companies by 2020. This is the third year in a row that the legislature is considering divestment legislation, and I have testified in favor of the legislation each year.

State Treasurer Beth Pearce remains firm in her opposition to divestment, citing reduced investment returns, increased financial risk, and the opportunity to influence fossil fuel companies through her office’s membership in the Investor Network on Climate Risk.

On February 12, I delivered testimony in favor of the bill before the Senate Government Operations Committee in Montpelier. With a deep sense of deja vu, I repeated my rebuttal to the Treasurer’s financial arguments, which continues to be based on a deeply flawed study that misleadingly asserts that divestment will hurt investment returns and dramatically overstates both transaction costs and the magnitude of the portfolio risks that would ensue from divestment. In fact, studies have shown that a fossil fuel free index could have outperformed broad U.S. stock benchmarks over the trailing 25 years with only a miniscule increase in overall volatility (risk).

I also made the observation that while engagement with fossil fuel companies has yielded little if any benefit, as Clean Yield has argued in more depth elsewhere, Vermont could still participate in engagement efforts by retaining token shares in selected companies. It seems ironic to me that the Treasurer is strongly asserting a preference for continued “constructive engagement,” when it doesn’t appear that Vermont has ever used its shares in any companies, let alone fossil fuel companies, to file a shareholder proposal. The fact remains that engagement has virtually no chance of succeeding at fossil fuel companies in the time frame in which it must.

Working closely with 350Vermont, we plan to continue to press the legislature and Governor Peter Shumlin’s administration to take a leadership position in the climate movement by embracing fossil fuel divestment from the state’s pension funds.

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