Peduto seeks city pension fund divestment in gas, guns and private prisons

Pittsburgh Mayor Bill Peduto wants city pension fund overseers to pull investments from companies dealing in fossil fuels, firearms and for-profit prisons, a strategy financial experts say could weaken the funds and result in lower annual returns.

Peduto last week penned a letter to the Comprehensive Municipal Trust Fund board requesting a pull out from the three economic sectors. Market experts say using pension funds to accomplish policy goals is risky business and can cause a loss in annual returns.

“The employees of the City of Pittsburgh and the residents we serve are being negatively impacted by the stressors of climate change, senseless acts of gun violence that are perpetrated upon our residents and public safety officials, and an incarceration system that is enabling systemic inequality,” Peduto wrote. “These are areas that our financial means should not perpetuate.”

Pension board Chairman Ralph Sicuro said he was aware of the risks.

“I have great concerns over that, and I have a fiduciary responsibility as does every member on the board to make decisions in the best interest of the fund,” he said. “If there are alternatives to any potential investments we have that will do as well, then I’m open to a potential change, but right now my position is that we need to do what’s in the best interest of the fund.”

Pittsburgh City Council in 2010 addressed underfunded pension plans by dedicating $735 million in parking tax revenue over 30 years to avoid state takeover of the funds. Pittsburgh at the time had about 30 percent of funding needed to cover about $1 billion in pension payments for future and retired police officers, firefighters and municipal workers.

The Peduto administration has increased annual pension funding since the mayor took office in 2013. As of March, Pittsburgh had about 58 percent of the cash necessary to cover $1.3 billion in pension liabilities, according to the pension board website. The invested portfolio totaled about $463.2 million.

Sicuro said he’s instructed fund advisers Marquette Associates Inc. to gather information on how much is invested in those companies and issue a report during the board’s September meeting. He was unsure if the board would vote on the issue during the meeting.

This isn’t the first time Peduto has sought to pull pension funds from fossil fuel companies. In 2017, he reiterated his position that the city should divest of that industry by 2030 as part of a commitment to reduce its carbon footprint.

Chris Fiore of the Chicago-based economic consulting firm Compass Lexecon and co-author of a 2017 report on fossil fuel divestment, told the Tribune-Review that it could cost the city $358,000 to $478,000 in annual pension fund returns.

“It’s purely a symbolic move that has no impact on the climate,” he said at the time.

Peduto was in New York on Wednesday and unavailable for comment.

Dan Gilman, his chief of staff, said the administration believes it can develop a divestment strategy that would not harm the funds.

“Climate change, gun violence and and the profitization of our criminal justice system are fundamental issues that all cities and governments and individuals should be taking on. At times there is a financial cost to that and it’s one that we believe is well worth it,” Gilman said.

“We believe there are ways to invest in renewable energy and other investments that wouldn’t cost taxpayers money,” Gilman added. “We do have a fiduciary responsibility to the taxpayers and our employees, but also a moral and social responsibility to the taxpayers as well.”