Two political allies are squaring off in a high-profile battle of words over the question of fossil-fuel divestment. And as State Treasurer Beth Pearce stands firm in her opposition to a bill that would scrub the state’s pension fund of coal stocks, Gov. Peter Shumlin is ramping up public criticism of her stance.
Shumlin wants the state pension fund to drop its holdings in coal companies, as well as its stock in Exxon-Mobil. And he wants lawmakers to pass a bill issuing that mandate to the seven-person board that oversees the $4 billion fund.
But his plan is facing pushback from an influential policy maker – one Shumlin happens to have appointed to the treasurer’s position back in 2011.
“Legislating investment decisions is bad practice. It’s bad public policy, it’s bad investment policy,” Pearce said Wednesday.
Last year, Pearce recommended against a divestment proposal that would have seen the state drop its holdings in hundreds of fossil fuel companies. Pearce says an analysis by her office found the divestment plan would likely have cost the fund millions annually in foregone investment revenue.
Shumlin’s plan isn’t as far-reaching as the one Pearce’s office examined. But Pearce says side-stepping the deliberative process used by the Vermont Pension Investment Committee would undermine the state’s fiduciary responsibility to future pensioners.
“When you start to do this by press conference, by public opinion, you get inaccurate data,” Pearce says.
The issue has given rise to a rare public battle between two statewide Democratic officeholders. They held competing Statehouse press conferences Wednesday. While Shumlin never mentioned Pearce by name, he made abundantly clear the target of his criticism.
Shumlin said Vermonters need look no further than their grassy lawns on a 40-degree February day to understand the gravity of the climate-change issue.
“And then we sit around and try to make up excuses for why Vermont should own coal stocks. I just don’t get it,” Shumlin said.
And he dismissed Pearce’s philosophical objections, saying no one seems to regret a legislative mandate from 1986 that sought to use divestment as a tool to undermine apartheid-era South Africa.
“I don’t think that the Legislature and Gov. Kunin were wrong in 1986 when the Legislature had the courage to pass a bill that says we’re getting out of South Africa,” Shumlin says.
Shumlin’s press conference included representatives from Vermont businesses and institutions – including SunCommon, and Sterling College – who have divested either their endowments or employee investment plans from fossil fuels. Shumlin said it’s time for the public sector to follow their lead.
If Vermont follows California in divesting from coal, Shumlin says, other states will follow suit.
“It’s called the snowball effect, if it ever gets cold enough to snow again. We can bring folks on, other states, who will join us in doing the right thing,” Shumlin says. “And this is how it started in South Africa.”
Shumlin’s event also include Eric Becker, chief investment officer at Clean Yield, an asset-management firm in Norwich whose customers want sound investment portfolios that do not include companies that extract or refine fossil fuels.
Becker says the divestment analysis conducted by Pearce’s office contained a “fatal flaw,” in that it assumed gains in oil stocks over the past 10 years would be repeated in the future. He says it also failed to capture with precision the universe of stock holdings that would be off limits under a divestment policy.
Pearce says she’s open to conducting additional analyses, including ones that examine the impact of divesting solely from coal companies.
The state pension fund includes only about $1.2 million in coal holdings, according to Shumlin’s office, and less than $300,000 in Exxon-Mobil stocks.
Pearce has at least one influential Democrat on her side. House Speaker Shap Smith says he thinks the pension fund should divest from coal. But he says it shouldn’t be the Legislature’s decision to make.
Pearce issued Shumlin an invitation to attend a meeting of the Vermont Pension Investment Committee later this month. Shumlin’s office says he plans to take her up on the offer.