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February 16, 2017

Vermont Pension Investment Committee Holds Hearing on PCA Report Rejecting Divestment

Today, the Democratic Vermont Treasurer expressed a strong opinion against fossil fuel divestment telling a hearing, “I’m going to be blunt. We talked about divestment. It doesn’t work in this portfolio.”

The comments from Beth Pearce were part of a presentation to the state’s Pension Investment Committee (VPIC) on a groundbreaking report on the costs of divestment. The report, conducted by the Pension Consulting Alliance (PCA) on behalf of the VPIC, confirmed that fossil fuel divestment is a “slippery slope” that conflicts with good governance and hurts pension fund returns. The lead author of this definitive report, Head of ESG and Sustainability at PCA Sarah Bernstein, Ph.D,  discussed her findings with VPIC members at today’s committee hearing and, to no one’s surprise, Vermont’s leaders once again agreed with the report’s findings.

Here is what the report’s lead author had to say at the hearing:

Divestment doesn’t reduce any greenhouse gases, in my opinion. It transfers ownership from one owner to another. It can be a big symbolic gesture, but it doesn’t work on government policy or a corporate policy to transition to another [fossil-free] structure.

“Divestment hasn’t come to the fore as a method for addressing concerns on climate change.”

“To get out of fossil fuels, you’d have to dismantle VPIC’s management strategy, which is to use co-mingled funds.”

The report’s findings reiterate previous comments from Treasurer Pearce and VPIC chair Tom Golonka on the costs and ineffectiveness of divestment. As the PCA report definitively concludes, “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.”

This report shuts the door on divestment in Vermont, and its conclusions should be considered by any pension fund or endowment facing pressure from divestment activists. For leaders of the divestment movement like Vermont’s own Bill McKibben, today’s report is another heavy blow for an already dwindling campaign.