The head of one of the largest taxpayer watchdog groups in the country said Friday that the climate crusades pressuring public universities and retirement pensions into purging fossil fuel assets could eventually implode because they ultimately hurt taxpayers more than oil companies.
Pete Sepp, the president of the National Taxpayers Union, told The Daily Caller News Foundation that environmentalists and oil divestment proponents such as Bill McKibben claim they put “people over profits, but they fail to realize that divestment harms real life human beings — both shareholders and taxpayers.”
What is interesting, he said, is that shareholders and petitioners have outlets helping them decide whether or not to divest – they can vote in hearings about what assets go where. But taxpayers are a different matter, Sepp said, they have no say in whether their money goes to fill the vacuum of divested retirement pension.
Sepp said the data show that oil companies are not the groups getting hurt by divestment demands – the real victims, he said, are the taxpayers who have their pensions frittered away by fund managers who bend at the will of environmentalist groups like 350.org.
Studies indicate pensions would likely have a difficult time filling voids made by jettisoned oil assets.
A study conducted by the University of Chicago Law School over five decades showed that fossil fuel assets do markedly better for retirement pension funds than do many other assets. In fact, according to the study, asset portfolios including oil assets did 0.7 percentage points greater than those that excluded them.
Sepp said that divestment campaigns create underfunded liabilities, which ultimately force taxpayers to “bear the brunt of the burden” of filling in the gap.
He continued: “Nobody asks taxpayers if they’re willing to fork over more money to fill the deficit left by oil assets.”
Sepp may have been referring to the California State Teachers’ Retirement System’s (CalSTRS) decision to divest coal assets in February. Members of CalSTRS voted to sell the pension’s coal company assets following a 2015 California law forcing the group to divest. The fund’s $1.5 million in coal assets represents only a small portion of CalSTRS’s overall $186 billion portfolio.
“We determined that given the financial state of the industry, the movement of the regulatory landscape and coal’s impact on the environment, its presence reflects a loss of value,” the pension’s Investment Committee Chair Sharon Hendricks said in a statement at the time.
Two Democratic California congressmen — Reps. Ted Lieu and Mark DeSaulnier — made similar demands in March of the largest public retirement fund in the country, California Public Employees Retirement System (CalPERS).
CalPERS eventually rejected the call. A spokesperson with the pension told TheDCNF on April 4 that the group’s members believe that staying with the fossil fuel industry allows the pension fund to use its considerable sway to persuade companies to do better by the environment.
CalPERS’ decision is not surprising, as the group is deeply sunk in fossil fuel stock – as of 2013, the fund owned $500 million in BP, $641 million in Royal Dutch Shell, $773 million in Chevron, and more than $1.2 billion in Exxon. So slicing off its oil assets would leave a sizable hole for taxpayer dollars to fill.
Recent comments and actions by retirement pension managers indicate they likely feel the same way Sepp does about divestment.
Greg Clark, the UK’s Secretary of State for the Department of Communities and Local Government, explained to reporters in 2015 the particularities surrounding a recent UK decision that essentially squashed fossil fuel divestment talk.
“Divisive policies” like fossil fuel divestment “undermine good community relations, and harm the economic security of families,” Clark said. A pension fund’s primary concern, he added, “Should be the pursuit of a financial return on their investments, including over the longer term.”
Sepp also believes that fossil free groups, instead of creating a negative image of the fossil fuel industry, are actually inadvertently stigmatizing everyday people simply because they use oil and gas as cheap forms of energy.
“If proponents are trying to stigmatize the industry, they’re almost doing the same thing to consumers at the same time,” he said. “They are saying people who want decent energy prices, ought to be stigmatized as well.”
He added: “It is the retired schoolteacher, police officer, or nurse” paying the cost, not oil companies like ExxonMobil or Shell Oil.
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