Washington, D.C.’s $6.4 billion public retirement pension announced Monday it fully purged direct investments from the U.S.’ top 200 fossil fuel companies, even though the pension has few direct investments in oil assets.
The District of Columbia Retirement Board’s (DCRB) decision brings all of the divestment proponents out of the woodwork, many of whom have worked to get Washington, D.C, among other cities, to divest fossil fuels.
Direct holdings, however, are only a sliver of the city’s pension investment portfolio. The city is invested heavily in mutual funds, commingled funds, and private equity – D.C. will not divest these assets.
In fact, according to the city’s most recent Private Investments Update, the D.C. pension fund has newly-sunk treasure in Lime Rock Partners VII, LP, a private equity investor that is solely focused on the upstream oil and gas sector, but is not considered a “direct holding.”
Divestment critics argue the move is much ado about nothing.
“It’s odd to see divestment activists celebrate yet another ’empty gesture’ announcement,” Matt Dempsey, a spokesman with Divestment.org, told The Daily Caller News Foundation.
Still, activists are unflappable.
“Time is up for the powers that be to act on climate change. If we’re going to take real action on climate change, we must take a hard stance against the fossil fuel industry,” Matt Grason, DC Divest spokesperson, said in a press statement Monday.
“By divesting from fossil fuels,” Grason added. “The nation’s capital has taken a critical step in creating the political will for climate action. Now it’s time for Congress to take note and pass comprehensive legislation to limit the carbon pollution driving climate change.”
Divestment activists were not the only people championing the decision — several D.C. council members have chimed in as well.
“I applaud the D.C Retirement Board for doing right by all Washingtonians,” said D.C. Council member Charles Allen. “In the past, divestment has proven to be an incredibly powerful tool for effecting positive change. By divesting from fossil fuels D.C. has helped pave the way for a brighter, better future.”
Jesse White, a District of Columbia Public Schools teacher and DCRB beneficiary, said the move was warranted because it shows the city is taking seriously “its responsibility to protect pensioners from risky fossil fuel investments.”
“The facts show that institutions are unwilling to fully divest precisely because it’s so expensive, as Professor Bessembinder’s new report clearly shows,” Dempsey said about new research showing the costs of divestment are much higher than many were led to believe.
Dempsey was referring to a study conducted by Hendrik Bessembinder, a professor of finance at the Arizona State University’s Carey School of Business, showing that jettisoning fossil fuel assets is likely to empty school endowments, ultimately causing them to lose as much as 12 percent of their total value over a 20-year time frame.
“These costs have nothing at all to do with the speculative matter of how stocks or industries will do in the future. These are largely unavoidable costs, every institution that divests will incur them, and as my research shows, they significantly add up as time goes on,” Bessembinder said in a press statement last week explaining his findings.
Todd Kendall, an economist with economic consulting company Compass Lexecon, told TheDCNF that green activists and others continue to downplay the costs of fossil fuel divestment.
“If fixed costs are factored into divestment,” said Kendall, who helped Bessembinder, “then the price of purging fossil fuels balloons to more than $7.4 billion for most major universities with sizeable endowments.”
The study tabulated data on university endowments, but the pension investments are similar, in that public pensions must contend with these fixed costs as well.
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