Commentary – Fossil Fuel Divestment Loses at Ballot Box
 (September, 2016)

By Rob Roper  Rob Roper

Over the past legislative session, the issue of divesting state pension funds of fossil fuel investments received considerable debate both in the State House and around Vermont. This debate spilled over into the August 9 primary election where incumbent Treasurer Beth Pearce, a vocal opponent of divestment was challenged by Richard Dunne, who ran a pro-divestment campaign. Divestment lost in a landslide.

Pearce, has been a long-time opponent of divestment since the issue first surfaced in 2013, and throughout her thirteen years at the Office of the Treasurer she has consistently championed fiduciary responsibility and a practical yet principled approach to pension management. The role of investing state pension monies is to generate the best return for pensioners and taxpayers and should not be influenced by politics.

Where other government officials have flip-flopped on their stance on divestment over the years following activist pressure, Pearce has repeatedly called the divestment a “bad practice” and explained to legislators that selling off stocks achieves nothing more than putting assets back into the market where they will be absorbed almost immediately. The pure economic and environmental rational of divestment led her to note: “I’m a person, as a fiduciary guided by the facts of the situation and frankly not the politics of it.”

In contrast, Pearce’s primary challenger Richard Dunne claims he was motivated to join the race because of Pearce’s stance on divestment, saying, “When I get in there, one of the first things I want to do is divest pensions from oil.” With an entire platform built on one issue with narrow voter interest, it came as no surprise that Dunne’s largely symbolic political concern failed to win votes over Pearce and her pensioners-first approach.

Pearce has made a concerted effort to hold a balanced and transparent process for hearing arguments for and against divestment, and the numbers ultimately speak for themselves: Calculations by the Vermont Treasury found that divestment would cost the state pension funds $10 million per year in lost returns and $8.5 million to implement alone.  Tom Golonka, chair of Vermont Pension Investment Committee (VPIC), also concurred that divestment is an expensive and complicated process that goes beyond selling a stock or two. In fact, a recent study by Arizona State University Professor Hendrik Bessembinder shows that the hidden costs, i.e., transactional and management costs, that accompany divestment have the potential to rob a large university endowment of 12% of its value over a 20 year period.

Aside from being a costly choice, divestment also does little in the way of actually lowering emissions aside from stigmatizing targeted energy companies. But finance experts and experts are not the only voices pushing back on divestment. The individuals who undoubtedly stand to lose the most from divestment—the pension beneficiaries themselves—have made it clear in Vermont and across the country that this is an unwanted policy. According to a recent survey of 800 individual pensioners in the United States, nearly two thirds of respondents said they could not support divestment if doing so would lower returns.

In Vermont, the reaction from pensioners was no different with no less than five different groups representing state employees and Vermont retirees strongly opposing pension divestment. These groups include the Vermont Pension Investment Committee (VPIC), Vermont Troopers’ Association, Vermont Retired State Employees Association (VRSEA), Vermont League of Cities and Towns and Vermont State Employees Association (VSEA).

If the empirical evidence was not enough to deter Pearce’s challenger Richard Dunne from running a single issue campaign for divestment, the outright opposition from the pensioners themselves should have been enough to make the candidate rethink his position. Fortunately, when this issue was left to voters at the ballot box, pragmatism and good governance triumphed – Pearce won 56%-29%.

– Rob Roper is president of the Ethan Allen Institute. He lives in Stowe. 

{ 1 comment… read it below or add one }

Jim Sawhill September 19, 2016 at 6:36 pm

National Association of Scholars – Mar 25, 2015 by Peter Wood, Rachelle Peterson – have likely done the most thorough exposure of “Divestment: Sustainability’s Last Frontier”. This is a chapter in their exposure of powerful University propaganda that includes the use of climate change, shaming, and “an ideology that demands new limits on economic, political, and intellectual freedom as the price that must be paid to ensure the welfare of future generations”.

Links to the work here –

absolutely eye opening and frightening


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The Ethan Allen Institute is Vermont’s free-market public policy research and education organization. Founded in 1993, we are one of fifty-plus similar but independent state-level, public policy organizations around the country which exchange ideas and information through the State Policy Network.

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