Pittsburgh is yet again toying with the idea of divesting its Comprehensive Municipal Pension Trust Fund from fossil fuels, prisons, and guns, but the city’s largest paper recently took a stand against the proposal.
Characterizing the divestment plan as “risky tinkering,” The Pittsburgh Post-Gazette warned that divestment was “a distraction” from crucial issues facing the pension program including chronic underfunding in a recent editorial.
The editorial board warned bluntly that, by trying to use the fund to pursue political ends, Pittsburgh was ignoring the very real financial problems its fund faces:
“With the pension fund chronically underfunded, the board should have other matters to address rather than this proposal.
The pension board has a duty greater than supporting the mayor’s political agenda. The board has a fiduciary duty to protect pensions funds for retirees from city employment and future retirees.”
To the editorial board, the matter is clear—the Pension Board’s first responsibility is to secure adequate returns on its investments and to try to use its investments to make a political statement would be both ineffective and misguided. They note that the combined municipal, fire, and police pensions are at just over 60% of full funding:
“Keeping the pension fund solvent is the proper role of the pension board — and that remains no simple task. The mayor and the board should avoid tinkering with the funds to make a political statement.”
This is not the first time the Pittsburgh Post-Gazette has spoken out against divestment. In July, the paper wrote another editorial, “Try This, Mr. Mayor: Activist investing is better than dumping stocks,” which reiterated the city’s responsibility to Pittsburgh taxpayers and the fund’s beneficiaries, and warned that divestment would limit the fund’s ability to advocate for change from the inside.
“The proposal is a poor one for various reasons, not least of which is the pension board’s duty to maximize investment returns so retirees get all of the benefits they’ve been promised without undue burden on taxpayers.”
Divestment would also hurt the city’s ability to meet its financial obligations. According to research from economist Chris Fiore, whose work was later cited by the Pittsburgh Business Times and the Pittsburgh Tribune back in 2017 when the divestment issue was first raised, halting investments in fossil fuel companies could cost the city’s pension funds $500,000 annually.
“’It’s purely a symbolic move that has no impact on the climate,’ said Chris Fiore of the Chicago-based economic consulting firm Compass Lexecon. Fiore co-authored a report released this month that says the nation’s top 11 public pension funds could lose trillions of dollars if they divested from fossil fuel-related investments. ‘The percentage sounds small, but when you realize these pension funds are quite large, that can be quite substantial,’ Fiore said.”
With market conditions increasingly uncertain, municipalities should be wary of imposing new conditions on how pension fund’s advisers invest. Now is not the time to play politics with pensioners’ retirements.
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