Fighting to Divest

 From 2013 to 2015 I worked on trying to get the City of Seattle to divest their pension fund.  There are some things I learned from that struggle, and I think there are some things that the City of Seattle also learned about the limits of their ability to manage their pension fund.

We discovered it was possible to come and make public comment at the Pension Boards meeting.  The first time we went we all just tried to convince them that climate change was real and that they ought to divest as a moral imperative.  We also learned how short two minutes are.  They responded to us in ways we came to realize that they all did believe climate change was real.   In fact we came to learn over time that their belief was great enough that we were a very disturbing prick to their conscience every month.

They regarded us with some hostility because we were not city employees and thus it was not our pension, so we marshalled up city employees and got them to give testimony.  It did not matter, but it did somehow give us the right to speak after that.   We met with the city employees union and explained it all to them one March.  They listened very carefully, agreed that they wished their pensions could be divested and then told us they could do nothing till they finished negotiating this years contract.  I asked when that would be....they said in Nov.   I took that as get lost.

We brought the Board hard evidence of coal losing value at a shocking rate.  They quietly let us know they had hardly any coal holdings.  They could not however believe the same would ever happen to oil or gas.  Next we set up one on one meeting with each Pension board member we could.   These ranged from a meeting in a Starbucks to a scarily sweeping view in an office 74 floors up in downtown Seattle, to being taken out to lunch by the union member on the board while he explained to us other social justice issues he wanted our help with.   But each said the same thing: they were sympathetic but it could not be done,  it was outside of their control, etc.  The main reason given was that they could not do something that no other city pension fund had done.  That their hands were tied by fiduciary responsibility.   At first we just took that to mean that they were afraid to go first, to break from the pack.

So we set out for a number of months to bring testimony about other institutions that had divested.  Mainly college and universities - it was true at first that no pensions had.   That was a higher bar because people were scared of accidentally destroying people's retirement lives.  But as I investigated a bit, I came to discover the fund had taken a terrible dip in 2008 crash which it had not recovered from.  This was because they had been invested too much in the housing market and in hedge funds.  We tried therefore to introduce the concept of "stranded assets" and to strongly impress on them that they did not again want to loose value in their portfolio.  I think this was the strongest argument we made.  But their advisory committee had on it a very old style economics professor who would repeatedly tell them that the market corrects itself, and it does this "perfectly" so they had nothing to worry about it.  We found other pension funds - those of churches, etc to report to them.  Eventually San Fransisco divested its pension...this we thought was the break we had been waiting for.

We got a national expert to testify by phone.  We got them through a friendly city council member who was our ally and on the pension board to hear a 1 hour webinar on stranded assets.   But they were unmoveable.  Finally they revealed a big clue- talking over and over again about fiduciary duty.  Finally it was spelled out to us: they were legally bound as board members to "protect the fund".  It meant they could not do anything that might cause the fund to lose money.  They could not do something that other peer groups would not do, and without the advise of financial experts.  In fact the previous Mayor had ordered them to divest and the finacial advisor and simply come and explained to him why they could not do that.

 Ahha, now it made sense their concern with other pension boards but they had been unpersuaded by the ones that were doing it.  So the advise of financial experts - we demanded they have their financial advising firm (BlackRock) take up the question of whether they could wind up with stranded assets.  It took their firm two months to produce the report.  They flew from another state the recent college graduate who had written it.  It was an embarrassment.  I don't know how he graduated college because he sited only three sources for the whole paper.  The paper assured them everything was fine and they should change nothing. A member of our committee, himself in graduate school writing his thesis on divestment, got that guys paper on a Friday and by our meeting on Tues had written a rebuttal paper the same length with about 15 sources sited.  The board took note and sent the report back to Black Rock to answer all the questions it had not answered.  The The 350 National staff person in charge of the divestment campaign told us we had the best "inside" game of any chapter.  This time a Senior Black rock official flew out the next month with a revised (but still pathetic) paper.  But the board accepted it this time.  After that we went to demanding they hire a different financial advisor firm.

I had an encounter with the board about stranded assets where I said:  "If someone had been able to authoritatively tell you in early 2008 that your current investment strategy would cause you to lose 1/3 the value of your portfolio (what actually happened) but there were no peers divesting, and no investment advisors telling you to do it what would you do?   One responded that no one was saying that back then so why would they do it.  I pointed out there was a small minority number of voices considered "fringy" that were warning it.  I asked what if you could go back in time knowing what did happen.  They responded that legally they would not have been able to do anything because of "the law" - they could be sued for breaking fiduciary responsibility.   That was when I knew we could not win.

By now we were running out of time.  The council member, our ally who served as the board chair was retiring, we would have no leverage once he was gone.  The union member who had taken us out to lunch proposed that they join a group about socially responsible investing, and they set out to do stockholder activism.  They were very proud of themselves.  This for them was the big action they took in response to our pressure.  It was their claim that they were actually doing something.   At this point our group demoralized stopped our monthly visits.   If we had kept up month after month, eventually we might have warn them down.

But I learned some important lessons in the campaign: 1) How short two minutes is 2) you can make a very sophisticated argument in 10 to 12 minutes which you can divide in 5 to 6 parts and have 5 to 6 people deliver the message.  3) It is important to hear the opponents objections as not just BS but as clues about where you have to shift things.  4) Capitalism does not play fair.  It has hard baked our climate disaster into the fabric of institutions.  Rules such as fiduciary responsibility take away the role of conscience or even the rule of common sense.  It renders the financial world a group of lemmings.      5) The city of Seattle would again lose pension money to stranded assets that they would be warned of.  6) That pensions are the hardest things to divest because they are for people to retire on.  I watched as college after college was willing to risk divesting endowment funds to line up with their values...but pensions, that was another thing.  7) that you cannot win without an outside game.  8) that campaigns this complicated our hard to run because most of our larger group could not understand at all these complexities and were more interested in the more straightforward task of asking the utility company to stop using coal - so we could not get our "outside game" going.

Perhaps the most important thing I learned is we will win the battle in time...we just may lose the war by that time.  You see this week a court in the Neatherlands ordered Dutch Shell to change its business plan and start shedding fossil fuel assets - this will inevitably lead to Shell having stranded assets - as we warned the city of Seattle 6 years ago. (Just as I prophetically told them "what if someone told you in advance...")   A court in Australia ruled that the government there has to start protecting the children there from the actions of these fossil fuel companies.  And stock holders in Exxon, ironically lead by BlackRock, took stockholder activism to pressure Exxon and Chevron to also start changing their business plans. Chevron stockholders took a 61% vote to start reducing emissions!  So it just took longer, much longer than I wanted for our little group to be vindicated.  The problem is unlike normal battles where if you win even a very very long battle you are positioned to be the winner....our poor planet is running out of time.  The fossil fuel companies were funded well by the stock market all those years to keep extracting fossil fuels and the planet is permanently hotter because of what they burned.   Mostly they have burned out time to solve this thing.

David had a good week against Goliath.  The people keep rising up.  The rules of our society have been written by the rich and powerful to serve them.   They keep climate change in place.  The rules are about money.  They are not about the earth or being in relationship with the earth.   Only a total paradigm shift can save us.   Not some divestments, not even well placed ones.  Not some changed business plans, certainly not forced one, can save us.   Only a fundamental change in how we think about and structure our relationships to each other and the earth.  Keep watching Goliath.