In the wake of President Trump’s decision to withdraw the United States from the Paris Accord, several local and state public officials have come forth with pledges to keep their states and cities in compliance with the treaty. While it is certainly their prerogative to do so, it is troubling that some of these announcements include talks of divestment, which does nothing to help the climate and whose only discernible effect is to hurt pensioners.
One of these leaders is Pittsburgh Mayor Bill Peduto, who issued an executive order that among other things, called for the divestment of the municipal pension system.
Mayor Peduto may have several legitimate disagreements with the President on the issue of environmental protection, but brandishing the pensions of retired municipal employees, firefighters, and police officers like a sign at a protest is not a constructive way to express those differences, as heartfelt as they might be.
As of late 2016, 3,161 firefighters, police officers, and other municipal employees contribute to the fund, while 4,209 retired and inactive members collect a paycheck, according to reports. The Pennsylvania Auditor General stated in March 2015 that the fund was in “moderate distress status,” due to its nearly half billion in unfunded liabilities.
Given the financial difficulties that the fund finds itself in, these pensioners’ retirement savings should not be forced to diminish further based on broader proclamations to address environmental challenges.
Divestment, even according to those who support the idea, makes no difference for the companies whose assets are under consideration. Rather, they strike at the well-being of those who depend on the funds to lead a comfortable retirement.
Mayor Peduto doesn’t have to take it from us. He needs only to hear from those officials around the country who have had to manage pension funds to see what they think of divestment:
- (…) divestment would increase costs and add diversification and technological risk to the portfolio. – Beth Pearce, Vermont State Treasurer
- Our experience is that this has been a noble way to lose money. And we’re not here to lose money. – Joseph Dear, Former CalPERS’ chief investment officer
- There is considerable evidence that divesting is an ineffective strategy for achieving social or political goals, since the consequence is generally a mere transfer of ownership of divested assets from one investor to another. – California Public Employees’ Retirement System (CalPERS) staff statement
- (…) divestment offers symbolic rather than genuine impact on climate change given the complexity of fossil fuel investments. – Montgomery County Retired Employees Association (MCREA) statement
- (…) divestment from fossil fuel stocks will not achieve the tangible results we want. –Ted Wheeler, Former Oregon Treasurer
- Divestment is a completely ineffective solution to address climate change. – Christina Wood, former CalPERS senior investment officer
The consensus is clear, especially from those officials with expertise and professional backgrounds managing pension funds. Divestment is an ineffective measure to reduce greenhouse gas emissions, and will only serve to destabilize the returns of pension funds for thousands of public employees in a place like Pittsburgh.