Lawmakers to Revisit Fossil Fuel Divestment

Climate change activists will renew their call for the state to divest from coal, oil and gas companies, and one lawmaker says he will introduce first-in-the-nation legislation to do so.

In the 2014 legislative session, a divestment bill was thwarted by concerns it would risk the growth of state employees’ retirement funds. But Sen. Anthony Pollina, P/D/W-Washington, who sponsored the bill this year, said he plans to introduce new legislation next year.

He said divesting from fossil fuel companies won’t undermine the state’s retirement fund, but it would send a strong message: “We’re no longer going to invest in companies that undermine the climate.”

This year’s bill died in the Senate Government Operations Committee by a 3-2 vote. But Pollina said he hopes to gain more support for a new bill that would phase out fossil fuel investments.

Institutions and local governments have pledged to divest over $50 billion in assets from fossil fuel companies as of September, according to a recent study. Thirty-eight percent of these pledges have come from educational institutions — including Sterling College and Green Mountain College in Vermont. However, no state government has divested any assets.

The Vermont Pension Investment Committee (VPIC) has $109 million invested in oil, gas and coal companies, including oil giants like Royal Dutch Shell ($10.9 million), BP ($9 million), Exxon-Mobil ($3.0 million) and Chevron ($1.5 million).

The state is also invested in a number of renewable energy firms, like NRG Energy Inc. ($1.1 million) and Iberdrola Renewables ($5.3 million), the second-largest wind operator in the U.S.

VPIC’s total investments as of June 2014 were more than $4 billion. If Vermont divested all its fossil fuel pension holdings, it would pay $1.8 million in transaction costs and lose $8.8 million annually in forgone returns, according to a 2013 report by NEPC, a Boston-based investment consulting firm.

The Vermont State Employees’ Retirement System Board in February approved a supplemental fossil fuel-free retirement savings option for state employees contributing to the state’s deferred compensation plan, as proposed by the Treasurer’s Office. The State Teacher’s Retirement Board of Trustees in August later approved a fossil fuel-free investment option for state teachers.

But the Treasurer’s Office has not backed a full-fledged divestment of the state’s pension holdings in fossil fuel companies. And Gov. Peter Shumlin has so far remained neutral.

“My view is that it’s not the sharpest tool that we can use, but I’m willing to look at it,” he said during a gubernatorial debate this month.

State Treasurer Beth Pearce says it’s better for the state to have a “seat at the table” to change corporate behavior. Her Progressive opponent in this year’s election, Don Schramm, supports divesting all state funds from fossil fuel companies by 2018.

Pearce pointed to one example when shareholders pressured FirstEnergy, one of the country’s largest electric companies, to agree to reduce carbon emissions. Vermont, which invests $411,000 in the company, worked with a coalition of environmentalists and investors to pressure the company.

“We’re going to put pressure on these folks. We’re going to use our proxy power, combined with other states, to continue to look for change in these companies,” she said.

Pearce said for companies like Exxon-Mobil, “You’re not going to turn the cruise ship around on a dime. It takes a series of steps that will lead to change.” But if the state were to divest, “you leave the conversation,” she said.

Pollina said this argument doesn’t hold up.

“It’s really unrealistic to think that Exxon-Mobil is going to change their practices because Vermont tells them to,” he said. “It’s not like we’re a major shareholder of Exxon-Mobil.”

JT Lukens, a fossil fuels divestment organizer with 350 Vermont, the state affiliate of the national group, said the group will ask lawmakers to divest the state’s pensions from the top 200 fossil fuel companies, as measured by owned carbon resources in the ground. But a good start might be divesting coal stocks, in part, because they are the least profitable among fossil fuels, he said.

Asked whether the state will divest from coal companies, Pearce said, “Divestment is a strategy that says ‘I’m walking away’ and somebody else is going to buy that share. I think the worst emission culprits are the folks we should be concentrating our efforts on.”

Last year, Pollina said the issue fell on the shoulders of only a couple of groups, 350 Vermont and Clean Yield, a socially responsible investment advisory firm. He said it would be helpful if other environmental groups lobbied for the issue, but has confidence 350 Vermont could get the job done.

Lukens said the group has the signed support of the Vermont Natural Resources Council, the Sierra Club and the Vermont Public Interest Research Group. VPIRG supports fossil fuel divestment, and is planning to continue working on the issue as it did last year, according to Ben Walsh, a clean energy advocate for VPIRG.

Pollina said in the past, the state has divested from companies working with South Africa’s apartheid regime, and later divested from tobacco companies.

“[It’s] not the first time the state has made these kind of investment decisions, realizing we should use our public dollars for the public good,” Pollina said.

Sen. Chris Bray, D-Addison, said he understands the the rationale of having a “seat at the table,” but he isn’t entirely convinced by it. He said the issue has been on his mind for several years, and this year, he is interested in running the numbers to determine if it is feasible.

He said the issue of divestment triggers an important question: “How does your portfolio reflect your values?” He said Vermont has established a goal of sourcing 90 percent of its energy needs from renewable by 2050 — a move prompted by climate change concerns.

“If we believe in that and want to stand behind it, let’s not go out at the very same time and make money off of fossil fuels,” he said.