The D.C. Council approved Tuesday a resolution in favor of divesting the city’s $6.4 billion pension fund from direct investments in 200 fossil fuel companies, a move that drew kudos from climate groups and shrugs from critics who dismissed the action as purely symbolic.
The council’s unanimous vote follows a three-year campaign by DC Divest, which cheered the D.C. Retirement Board at a press conference Monday featuring Council member Charles Allen.
“I applaud the D.C. Retirement Board for doing right by all Washingtonians,” said Mr. Allen, Ward 6 Democrat. “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.”
Matt Grason, spokesman for DC Divest, said the “nation’s capital has taken a critical step in creating the political will for climate action.”
But critics of divestment argued that the decision means little because the pension board, like most institutional investors, has only a small portion of its portfolio in direct investments. Most of the portfolio is invested in mutual funds, co-mingled funds and private equity, which invest in fossil fuels.
“Divesting from only direct holdings has been an increasingly popular way to satisfy divestment activists’ demands without incurring the costs associated with actually dropping all fossil fuel investments,” said DivestmentFacts.com in a Monday post.
The approach has been dubbed the “Syracuse model” after Syracuse University’s decision in April 2015 to remove its direct investments in fossil fuel companies.
DivestmentFacts.com, a project of the Independent Petroleum Association of America and other energy interests, cited a recent study showing that oil and gas stocks outperformed other assets between 2006 and 2013.
Institutions that opt to divest also incur transaction and management fees that “have the potential to rob endowment funds of as much as 12 percent of their total value over a 20-year time-frame,” said the website.
According to its Sept. 30 private investments update, the D.C. pension fund has made recent investments in Lime Rock Partners VII, a private equity investor that is “solely focused on the upstream oil and gas sector,” as well as EnCap Investments, which provides venture capital to the fossil fuel industry.
“Neither of these investments would be considered ‘direct holdings’ and are therefore not part of this, largely symbolic, divestment decision,” said DivestmentFacts.
The D.C. government has taken ambitious action on climate change, adopting a goal of reducing greenhouse gas emissions by 80 percent by 2050, while Mayor Muriel Bowser has signed an agreement to supply 35 percent of the government’s electricity with wind power, according to DC Divest.