Should Massachusetts divest its pension fund from fossil fuel companies?
Lowell resident, works for Local 509 of the Service Employees International Union, member of the MassDivest Coalition
As author and environmentalist Bill McKibben says, “It makes no sense to pay for your retirement by investing in companies that guarantee you won’t have a planet worth retiring on!”
The global scientific community agrees that rising global temperatures are caused in large part by the burning of oil, coal, and gas, which, if unchecked, will have catastrophic effects on human civilization. We have begun to see this future with the recent storms and their massive flooding.
One effective tactic in fighting global warming is to have large investors sell holdings in oil, gas, and coal companies, and not purchase any more. This makes financial sense since these companies stand to lose billions as fossil fuels become “stranded assets” and also proclaims that these companies are part of the problem.
One of our state’s largest investment portfolios is managed by the Massachusetts Pension Reserves Investment Management board, which invests money from the state employees’ and teachers’ pension funds. MassDivest, a coalition of large public sector unions and environmental groups, with strong support from legislators, is urging PRIM to divest itself of fossil fuel holdings.
Massachusetts is a leader in addressing climate change through legislation such as the Global Warming Solutions Act, which requires transitioning to renewable energy. So continuing to invest in the very companies that are the main obstacles to a successful transition to renewable energy makes no sense. Divestment, proven successful against apartheid and tobacco, is one way Massachusetts can stand up against the destructive policies coming from Washington.
A recent study prepared for MassDivest by Trillium Asset Management, looking at the past five years of pension fund investment, projected that $1 billion could have been earned by divesting at the outset. Instead, the fund lost approximately $79 million over that period by failing to divest from fossil fuels.
The Trump administration, with its ties to the fossil fuel industry, has announced that the United States will withdraw from the Paris Climate Agreement. The admistration is moving to repeal President Obama’s Clean Power Plan and the ban on offshore drilling, has rolled back environmental regulations, and is failing to adequately sanction violations of environmental rules.
Around the world, hundreds of organizations, universities, and cities are fighting back by announcing plans for fossil fuel divestment. Let’s join the movement!
David G. Tuerck
Franklin resident, President of the Beacon Hill Institute and professor of economics at Suffolk University
A coalition of environmentalists and public sector unions wants the Massachusetts pension fund to divest itself of fossil fuel stocks. The apparent goal is to punish the targeted producers for thwarting efforts to ameliorate climate change. It would be hard to find a more wrongheaded idea for pension fund management.
Three experts from the consulting group Compass Lexecon have shown that divestment would cause a pension fund to lose 7 to 9 percent of its value over 50 years —
hardly a welcome outcome, considering that Massachusetts as of 2016 had the nation’s 10th most underfunded pension fund, according to a 2017 report by Bloomberg.
And for just what crime would the targeted companies be punished? Apparently, for providing 81 percent of the energy used by consumers. Divestment advocates would appear to prefer a world that relies on horse carriages for transportation and whale oil for light, and a world without economic growth.
The US Energy Information Administration predicts world energy consumption will increase by 28 percent by 2040, fueled in part by rapid economic growth in Asia. Fossil fuel production, though falling relative to renewables, will still account for 77 percent of energy use. Countries like China and India will not curtail their energy consumption at the cost of future growth.
Divestment advocates forget that energy supplies are not the province solely of publicly-traded corporations. Fifteen of the world’s 20 largest energy-producing companies are state-owned. Can anyone believe that Rosneft, which is 70 percent owned by the Russian government, would gladly reduce oil output out of concern for climate change?
US carbon dioxide emissions actually declined by 14 percent from 2007 to 2016, thanks in part to the replacement of coal by shale and other unconventional sources of natural gas, which emits only about half the carbon dioxide as coal. The divestment lobby should thank natural gas producers for this improvement in what they see as climate change.
Divestment will not work. The only way a pension fund can sell stocks is for other funds to buy them. Fossil fuel producers will not gallantly deny their customers energy because the divestment lobby wants them to. Divestment should be seen for what it is: a pointless exercise in virtue signaling.