Last week, the Portland, Oregon City Council took the logic (or illogic) of investing based on political ideology to its conclusion and voted to divest the city’s investment of all corporations. The move was brought about after protests from a loud but vocal minority. From now on, the city’s portfolio will be invested in “federal bonds and other non-corporate options.”
Interestingly enough, the proponents of the proposal themselves admit that the divestment decision comes with a massive cost. The new policy will cause the city to lose out on “at least” $4.5 million annually. According to the Portland Mayor Ted Wheeler, that amount of money could pay for 200 affordable housing units or more than 600 new shelter beds.
Ted Wheeler should know a thing or two regarding divestment, as he was the State Treasurer of Oregon from 2010 to 2017, and oversaw the management, among other things, the state pension funds, which have come under attack from divestment advocates all across the country. In a 2014 op-ed in The Oregonian, Wheeler labelled divestment as “unproductive.” Refuting a common refrain from divestment advocates, Wheeler stated:
Divestment from fossil fuel stocks will not achieve the tangible results we want. Academic studies demonstrate that divestment actions, on their own, have no measurable effect on the value of targeted companies and do not change corporate behavior.
Then State Treasury Wheeler insisted that corporate engagement is the proper way to influence decisions made by energy companies. His opinion on divestment and corporate engagement is reflected by others who have actually worked with public pensions. Christianna Wood, a former California Public Employees’ Retirement System (CalPERS) senior investment officer, who participated in divestment efforts while at CalPERS, stated emphatically that “the notion that divestment is effective ignores historical fact” and argued that engagement is a more effective strategy, saying, “when long-term owners collectively engage companies, a lot can be accomplished.”
The latest move by the Portland City Council takes divestment to the extreme conclusion that emotions-based investing allows. Worse, the city’s actions threaten the well-being of municipal pension funds, such as the Fire & Police Disability & Retirement Fund Pension. By legitimizing the tactics and arguments of divestment activists, Portland’s City Council has opened the door to further divestment actions, incurring further losses to taxpayers in the name of symbolic victories.