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Ending Pittsburgh's fossil fuel pension investments wouldn't be easy or cheap

Tom Fontaine
| Monday, June 19, 2017, 5:57 p.m.
Pittsburgh Mayor Bill Peduto has said he is committed to ending investment in fossil fuel-related companies.
Nate Smallwood | Tribune-Review
Pittsburgh Mayor Bill Peduto has said he is committed to ending investment in fossil fuel-related companies.

Researchers say that Pittsburgh's pension funds could lose nearly $500,000 a year if the city stops investing in fossil fuel-related companies — as Pittsburgh Mayor Bill Peduto has said he is committed to doing.

While that loss would be damaging for Pittsburgh's underfunded pension funds, it wouldn't do much to change the behavior of fossil fuel companies, the researchers suggest.

“It's purely a symbolic move that has no impact on the climate,” said Chris Fiore of the Chicago-based economic consulting firm Compass Lexecon.

Fiore co-authored a report released this month that says the nation's top 11 public pension funds could lose trillions of dollars if they divested from fossil fuel-related investments.

“The percentage sounds small, but when you realize these pension funds are quite large, that can be quite substantial,” Fiore said.

When applying the same formula to Pittsburgh's pension funds as the report did to the nation's top 11 funds, the losses could be $358,000 to $478,000 a year, Fiore said.

Peduto reaffirmed this month his plans to eventually divest from fossil fuel-related companies.

After President Trump mentioned Pittsburgh during a speech in which he said he was withdrawing the United States from the Paris climate accord, Peduto issued an executive order indicating that Pittsburgh remains committed to those initiatives and to goals Peduto outlined during a 2016 summit in Paris. Among them, the city aims by 2030 to divest its pension assets in fossil fuel-related companies.

“That's for a good reason,” city Finance Director Paul Leger said of the 2030 target. “We have a philosophical basis for wanting to do it, but it's going to take time to find replacements ... that don't damage the health of the fund overall.”

Much of the city's pension assets are in mutual funds that include a range of investments. Most of the funds require investors to invest in them as is — all or nothing.

“We would have to go through each of those and identify where the (fossil fuel) investments are within each of the mutual funds and then go out and find replacement funds,” Leger said, estimating that 5 percent of the city's assets are invested in fossil fuel-related companies.

Pittsburgh's has about 59 percent of the cash value in retirement accounts needed to meet an estimated $1.2 billion in obligations for current and future retirees.

Tom Fontaine is a Tribune-Review staff writer. Reach him at 412-320-7847, tfontaine@tribweb.com or via Twitter at @FontainePGH.

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