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April 23, 2019

Denver’s Latest Fake Divestment Stands Against State’s Opposition to Empty Gesture

350.org is (unsurprisingly) attempting to make news around the City of Denver’s “divestment” from fossil fuels. In reality, this decision is as empty as it is misguided.

First off, the city’s own Chief Sustainability Officer states, “We never held stock in coal, oil or gas companies, and our Mayor has no control over the employee pension fund, so he did what he could with the assets he controlled.” Not much to divest and, luckily, no impact on retired employees.

Instead, this announcement is focused on debt owned by the fund, including a city decision to “liquidate all debt instruments issued by non-renewable energy companies in its reserve fund.” According to city leadership, “By April all had been sold, and the City was looking to replace them with debt instruments of comparable quality from energy efficiency and renewable energy companies.” And during the mayoral debate that 350.org is citing, current Mayor Hancock said less than one percent was invested in companies that may be doing business in fossil fuels.

Keep in mind, recent academic reports took a look at Colorado’s state pension, the Colorado Public Employees’ Retirement Association (PERA), and found divestment would impose losses on the fund ranging from $36 to $50 million per year— equivalent to cutting individual pension payments to Colorado beneficiaries by $300 to $400 annually or cutting annual benefit payments to roughly 1,000 Coloradans.  These costs are driven by impacts to diversification, and increased when adding in the transaction and management costs required to keep a fund fossil free.

Despite these costs, the city of Denver chose to move forward with fake divestment anyway. But based upon language from the City and County of Denver’s Department of Finance, real divestment would go against the city mission of providing for the city. From its reporting:

“It is the policy of the City & County of Denver to invest its funds with the goal of obtaining the highest investment return consistent with the preservation of principal and provision of the liquidity necessary for daily cash flow demands… The City and County of Denver’s investment portfolios will be adequately diversified to avoid incurring unreasonable risks inherent in overinvesting in specific instruments, individual financial institutions or maturities.” (emphasis added)

Calling this divestment feels like a bit of a stretch, and is definitely not the $6 billion announcement 350.org is making it out to be. But Denver’s decision still goes against the numerous rejections of divestment we’ve seen from Colorado’s leaders, politicians, main pension fund and universities. Let’s take a quick look at how divestment has fared in Colorado.

Earlier this month, the Colorado House Finance Committee voted down a bill that would have mandated the Colorado Public Employees’ Retirement Association (PERA) conduct a study of investments and determine climate-related financial risk among assets.  The bill was defeated by a 10-1 vote, despite the fact that it only serves as a precursor to divestment and does not instruct any holdings be sold. Lawmakers based their votes on the fact that it was unnecessary and that maximizing returns is the main priority of the fund.

Meanwhile, on college campuses, the movement has not fared much better.  The University of Denver endured a full fledged campaign by 350.org to force the school to divest, but DU rejected the policy in early 2017:

“Regarding divestment, the Board adopted the task force recommendation that divestment in fossil fuel companies, or any other industry, would not be an effective means of mitigating global warming nor would it be consistent with the endowment’s long-term purpose to provide enduring benefit to present and future students, faculty, staff and other stakeholders.”

Ahead of the decision, Divestment Facts hosted a forum on campus, where experts discussed how much the policy would cost the university.  A column in the Denver Post also implored DU to reject 350.org’s “shallow and misleading” case.

Colorado’s university system has also avoided divesting.  In 2015, the CU Board of Regents voted against divestment in a 7-2 vote, a tally which included “no” votes from two Democrats.  The vote came despite organized protests by students that included sit-ins and camp-outs in the snow.  In 2017, Fossil Free CU, the student divestment group at the University of Colorado at Boulder, announced it was ceasing operations in a Facebook post.

And, as Divestment Facts noted, the divestment group at Colorado College waved the white flag “due to lack of participation.”

So, while activist groups may want to count the City of Denver’s recent move as a win, it’s clear where the rest of the state stands on divestment.