[Cross-posted from Erickson, Jon D., “Opinion: Divestment Makes Economics Sense,” Burlington Free Press, May 1, 2016.]
Gov. Peter Shumlin and a majority in Vermont’s House and Senate have called for divestment of state pension funds from coal and ExxonMobil.
The environment and economy are so often seen in conflict, that it may be shocking for many to learn that on divestment, our ecological and economic bottom lines are in full alignment. Coal becomes a worse investment every day.
The environmental case for divestment, we all know, is clear. It becomes even stronger with recent revelations that ExxonMobil executives knew the human causes and consequences of climate change for decades.
But for many, divestment is an economic issue. If we want to talk about the risk of fossil fuel stocks losing value as the global community moves away from burning carbon, coal is exhibit A.
President Obama has halted new coal mining on federal lands, and coal’s share of electric generation nationwide has plummeted. Many large coal companies have gone belly up, and this week the world’s largest, Peabody, filed for bankruptcy. The Dow Jones Coal Index has free-fallen from nearly 750 eight years ago to the low 30’s today. Even China is closing thousands of coal mines.
Chiza Vitta, a metals and mining analyst with the credit rating firm Standard & Poor’s, noted in a March 20 New York Times article that, “There are always going to be periods of boom and bust. But what is happening in coal is a downward shift that is permanent.”
Some members of Vermont’s Pension Investment Committee (VPIC) have raised fears that investment managers will charge exorbitant fees to sell our few coal stocks. Our experience at the University of Vermont tells a different story. In recent years, some generous UVM donors have made their support conditional on investing in a portfolio without fossil fuel or nuclear power corporations. Not only did fund managers create a Green Fund at normal costs, but it has far outperformed the university’s broader portfolio.
The good news is that following action in the Legislature, VPIC and state Treasurer Beth Pearce have agreed to revisit these issues since rejecting earlier appeals for broad divestment. At the University of Vermont, we had a similar movement for broad fossil fuel divestment that was ultimately rejected. Perhaps this new leadership at the state level will encourage UVM’s Board of Trustees to take another look.
As someone who works with students daily, I fear they see our leaders speak to the crisis of climate change in one breath, but delay taking action in the next. We have the opportunity to show our children, the nation – and indeed the world – that Vermont takes climate change seriously by putting our money where our mouth is. This targeted divestment is a modest step in the right direction.
The eyes of many will be on the Statehouse on May 3. I trust that Vermont’s Pension Investment Committee will rise to the occasion and protect the value of public pension funds, uphold our commitment to transition away from fossil fuels, and send a message to other states and nations that its high time to divest.