Senate Bill 2155 introduced during this 2016 legislative session would require the state Employees’ Retirement System (ERS) to completely divest its investment portfolio of coal, oil and gas companies by July 1, 2021.

Specifically, the bill would require ERS to sell, redeem, divest or withdraw all publicly traded securities of each company identified by a Global Industry Classification Standard code in the areas of coal and consumable fuels, integrated oil and gas, and oil and gas exploration and production.

This mandated divestment would be completed in 20 percent increments from July 2016 through June 2021, resulting in 100 percent divestment by July 1, 2021.

Completely ignored by SB 2155 is the fact that the ERS is governed by a strong and effective board of trustees that has a fiduciary responsibility to make investment decisions for the sole purpose of providing promised benefits to its active and retired members and beneficiaries.

To this end, they are advised by a professional team of staff, consultants and managers, providing accountability, skills and independent resources to make the complicated decisions surrounding the public fund’s investments.

Forcing the ERS to divest from all of its investments in fossil fuels is risky, unwise and costly to our fund. ERS can afford neither the risks nor the cost that divestment would entail.

Even the most cursory look around shows how intimately tied our economy and lifestyle here in Hawaii is linked to the beneficial use of fossil fuel. Fuels are used today more efficiently and cleaner than ever, and the trend is forecast to continue.

The primary issue, however, for those who are beneficiaries or who are charged with managing the ERS’ assets is not about fossil fuels; it is about the future growth and sustainability of our pension plan. Forced divestment would inhibit the ERS’ ability to meet its investment goals and ultimately compromise its ability to meet long-term benefit obligations.

Our fiduciary responsibility as trustees, both current and former, requires that we minimize that risk. ERS provides over a billion dollars a year in pension and other benefits to its 119,000 members and beneficiaries. We must not impair its ability to continue to do so.

While scores of public and private pension plans have weighed the potential impact of full divestment on their fund’s assets, we don’t know of a single large statewide plan that has elected to do so.

The majority of college and university endowments contemplating the issue have also declined divestment as a means to achieve stated environmental goals. Harvard, Yale, MIT, NYU and Columbia have all researched the issue and responded resoundingly, NO! They conclude divestment would hurt their returns while having little, if any, impact on the achievement of the environmental goals divestment proponents claim.

We support the state’s goal of producing virtually all of its energy from renewable sources by 2045. Those supporting divestment are betting on renewables and predict that fossil fuels will have no role in our future. They may be right, sometime in the distant future, but not right, now. Some fossil fuel-related companies in which ERS has invested are developing the same renewable technologies that divestment proponents hope to rely on.

The fund employs sophisticated investment professionals and a disciplined investment approach across industry sectors. Abandonment of our long-term investment perspective to those who have short-term and unrelated goals is not in our members’ best interest.