Senate advances pension fund carbon-divestment without support from state’s investment commission

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FOR CLIMATE OR STATE EMPLOYEES?: The state’s pension funds have traditionally been run for the financial benefit of pensioners, but a new bill proposes that those who manage these investments put climate policy first.

The Senate Committee on Government Operations on Friday voted unanimously to approve a bill that would divest state pension funds from carbon-related forms of energy investments.

The bill, S.42, is an act relating to divestment of State pension funds of investments in the fossil fuel industry.

On Thursday, the state’s investment commission told the committee that they do not formally endorse this bill as written, and that it could hinder their ability to best serve the people they are supposed to represent.

Some warnings

Thomas Golonka, chair of the Vermont Pension Investment Commission (VPIC), spoke with the committee on Thursday afternoon. While he said his organization has adopted a policy working towards decarbonization, he warns that this effort is not without potential pitfalls.

“I know this is out to 2030 and to 2040, but to implement some of these plans, particularly in the State of Vermont, takes a lot of process, procedure, and asking for funding,” he said.

Golonka said VPIC had a meeting earlier that morning, and he had some key takeaways to report, including a few points of agreement between lawmakers and commission. For example, he said the requirement that VPIC tries to measure its policy’s carbon footprint is a good idea, including identifying metrics that can be used to measure their footprint as well as identifying goals to achieve emission reductions.

He also said: “We agree that climate change is a universal problem and that we ought to use all means, including the capital of statewide pension plans, to address it, specifically to reduce CO2 emissions.”

On a proposal that the pension fund put a fine on fossil fuel companies, he agreed and said, “We think this makes sense if we’re going to focus our efforts on fossil fuel companies.”

The Commission doesn’t like mandates

Golonka also went over some points of disagreement — specifically, the precedent of mandating investment policy when markets can be unpredictable.

“We disagree in terms of mandates to divestment, at least at this stage in the game,” he said.

Golonka suggested that using legislation to dictate energy policy could be more impactful.

“First, the bill presumes that divestment is more effective than reducing CO2 emissions,” he said.

Their studies aren’t complete

Golonka also commented that this bill has timeline targets for decarbonization, which he added can be troublesome, especially if they haven’t gotten their study reports back yet.

“We’re a little concerned about setting timelines before the report is complete,” he said. “We’re more than willing to get this report done as quick as possible before next session.”

Beneficial for investors?

He told the committee that energy market trends are not entirely predictable, and this bill makes some assumptions that could put VPIC in the uncomfortable position to act “not in the fiduciaries’ interest.”

“If there is a statement of intent that says you are going to divest from private markets in 2040 without knowing the numbers that we get back from this study, we’re not going to be able to do it, and we’re going to have to pre-emptively use our authority to act, as it’s not in the fiduciaries’ interest,” Golonka said.

Doesn’t support as written

After stating that the Commission generally supports efforts to address climate change, Golonka added:  “However we oppose it as written based on our fiduciary duties to maximize returns to the underlying retirement boards, and we feel it’s premature to set policy without having those actual numbers that the report would justify and give to us.”

The whole testimony from Thursday can be seen online here.

Michael Bielawski is a reporter for True North. Send him news tips at and follow him on Twitter @TrueNorthMikeB.

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