Cambridge, MA Should Not Follow in the Divestment Footsteps of Somerville

It is a fact that good ideas get copied by others. The inverse, however, can also apply, and when it comes to the bad idea of divestment, those bad ideas come with real costs to pensioners.

With the city of Somerville, Massachusetts divesting their municipal pension fund of traditional energy assets, some divestment advocates are calling for this bad idea to be replicated elsewhere, such as in neighboring Cambridge. A recent letter to the editor written by a Cambridge resident encouraged the City Council and Manager to take up action on the issue.

It is puzzling that residents would want to impede the performance Cambridge’s pension fund, considering that it has been doing better than some funds. At the end of FY 2016, the net pension liability of the municipal pension fund was 80%, a figure far better than many funds around the country. Fiduciary duty would dictate the sale of energy assets, should they hurt returns, but mandating their sale based on political considerations hurts both pensioners and taxpayers.

Fighting for a cleaner environment should be something that all governments need to prioritize, but using pension funds to do it is an ineffective approach. Divestment is a distinction that has been recognized by at least some in the Massachusetts political establishment as Bill H.3281, mandating the divestment of state pension funds, continues to stall in the state legislature.

If Cambridge should imitate anyone on divestment, they should look towards the actions of CalPERS, or the Vermont state pension system, or the New York Comptroller, all of whom explicitly have rejected divestment as a tool for change, opting instead for corporate engagement using the financial leverage that comes with a diverse portfolio. That is a good idea that Cambridge should emulate.

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