Vermont became a battleground state for the issue of divestment after then-Governor Peter Shumlin (D) called for state pension funds to sell off fossil fuel assets in his 2016 State of the State address.
Fast forward 15 months, and Vermont Watchdog is now reporting that for the second year in a row the divestment initiative will not be taken up during this legislative session, having failed to survive “crossover week.” This marks the effective end of state mandated divestment of Vermont’s public pensions.
Safe to say, this outcome is an extreme disappointment for divestment activists since they could not notch a victory in a deep-blue state like Vermont. But, it shows that when divestment is evaluated on its merits then if fails to pass muster.
Opposition to Shumlin’s divestment proposal was swift, and came from a large number of groups that represent Vermont’s pension beneficiaries. Democratic Treasurer Beth Pearce was one of the most vocal opponents of divestment:
“From our end, legislating investments is bad practice…My first priority is to protect the 49,000 active, vested and retired members of the system, the beneficiaries, and the taxpayers who put dollars into that system. For me, I don’t think [divestment] is the best approach.” (January 17, 2016)
Instead of letting politics dictate such a decision, Pearce and the Treasury Department commissioned a non-partisan economic report to understand the financial impact divestment would have on public funds. The study unsurprisingly found what we have known all along: divestment would increases costs, reduce diversification, fail to impact targeted companies, and introduce a “slippery slope of potential for other restrictions” on future investments. Ultimately, the study found that divestment was not in the best interest of retirees. From the report:
“Divestment conflicts with VPIC governing policies: Given the financial and governance costs that come with fossil fuel divestment, in PCA’s opinion, divestment of fossil fuels, thermal coal, or Exxon has not been shown to be in the best interests of VPIC pension beneficiaries, and conflicts with VPIC governance structure.”
The study was definitive and after it was released, State Representative Robert Bancroft declared that it was the end of the road for divestment in Vermont.
It seems voters agree, as Beth Pearce easily won reelection despite running against a pro-divestment candidate who made the issue front-and-center in the campaign.
Luckily, facts prevailed for Vermont retirees who depend on strong returns for their financial well-being. Even in the home state of Bill McKibben, the founder of the divestment movement, officials made the economically responsible decision not to divest instead of bowing to pressure from activists.
This is a trend we have seen nationwide. As Divestment Facts has reported recently, the divestment movement has faced roadblocks in Democratic strongholds like New York, Massachusetts and California. Despite friendly politics, state officials and heads of pension funds have consistently opposed divestment because of its immense costs and lack of any environmental benefit.
Vermont was unwilling to go through with the empty gesture of divestment. Others facing similar pressure should follow their lead.