Divesting From Fossil Fuels, Investing In The Future
By James B. Stewart, New York Times
The trustees of Cooperstown, N.Y., hardly expected their village (population 1,834) to emerge as a flash point in a national debate over climate change and socially responsible investing.
But when they voted in October to divest the pension fund they oversee of all fossil fuel holdings, Cooperstown became the first community in the nation to do so — not just coal (like Stanford University), but also oil and gas.
Just as the divestiture movement has roiled college campuses across the country, pitting environmental activists against college endowment managers, the trustees’ decision caused a stir locally. The town treasurer and tax collector publicly opposed the move, and a village resident took to the local newspaper to suggest the trustees were indulging their personal causes at the expense of prudent portfolio management.
The issue has upset the usually tranquil village on the shores of scenic Otsego Lake, which bills itself as “America’s hometown” and is home to the National Baseball Hall of Fame. Talk of carbon neutrality and fiduciary duty has at least temporarily supplanted Donald J. Trump, who easily carried Otsego County.
Cooperstown “is abuzz,” said Jim Kevlin, the editor and publisher of the local newspaper, The Freeman’s Journal (founded in 1808 by James Fenimore Cooper’s father) and its companion website, allotsego.com.
“I’ve gotten into arguments with a lot of my friends,” said Louis Allstadt, a retired Exxon Mobil executive and town trustee credited with spearheading the divestiture movement (or blamed for it, depending who you ask). “Even at my weekly lunch group.”
Mr. Allstadt is emerging as something of a small-town hero in the divestiture movement, in part because he has gone full circle on the issue, from managing all of Mobil Oil’s exploration efforts in the United States, Canada and Latin America and helping oversee Mobil’s merger with Exxon during a 31-year career in the industry, to an antifracking, anti-fossil-fuel activist.
He has owned a house near Cooperstown since 1973, which served as both a vacation getaway and home base during the years he was based overseas. He moved to the village in 2008 and, after his post-retirement conversion, gave over 150 speeches in upstate New York as part of a successful campaign to ban fracking in the state.
“It’s so much worse than the conventional drilling I was familiar with,” he said. “I started talking about how to make it safer, and inevitably someone would ask, ‘Can you make it safe?’ And basically, the answer is no.”
Mr. Allstadt ran for town trustee as an independent, with support from both Democrats and Republicans. “I wasn’t running as a ‘green,’ or anything like that,” he said. “I mostly focus on efficiency and lowering costs.” (There are two independent trustees and four Democrats, which makes Cooperstown something of an anomaly in heavily Republican Otsego County.)
Mr. Allstadt is becoming more than a local celebrity. He will be featured next week at a news conference in New York City hosted by the fossil fuel divestment advocacy group Divest-Invest Philanthropy.
“Cooperstown showed immense leadership in its decision to divest,” said Lindsay Meiman, a spokeswoman for 350.org, the environmental activist group and a supporter of Divest-Invest.
But the move sparked immediate opposition outside the environmental movement, starting with the town treasurer and tax collector, Derek Bloomfield, who argued at the trustees meeting in October that energy stocks provided valuable diversification.
“Social investment should be done with one’s own money,” he maintained, according to a report in The Freeman’s Journal, adding that in his view, “fossil fuels have done more to raise mankind out of poverty than any other development through the ages.”
“They’ve created a great threat to humanity,” Mr. Allstadt shot back.
Mr. Allstadt argued that the industry faced insurmountable obstacles in the future and fossil fuel stocks would suffer as a result. “You don’t just keep driving your car when you see a cliff ahead,” he told The Freeman’s Journal.
The discussion “got a little contentious over the historic merit of fossil fuels,” the mayor, Jeff Katz, told me this week. He and his family were drawn to Cooperstown by its baseball legacy; he has written two books on the topic, including “Split Season,” about the strike-marred 1981 baseball season.
As a former options trader in Chicago, Mr. Katz is also financially sophisticated. He and the trustees oversee a pension fund, with total assets of about $900,000, that benefits the town’s volunteer firefighters and emergency squad. Of that amount, about $140,000 was invested in an S.&.P 500 fund that included fossil fuel stocks. But last year, State Street started an exchange-traded fund that excludes fossil fuels from the S.&P. 500 (the fund’s symbol is SPYX), offering a cost-efficient way to purge fossil fuels from any portfolio.
“It’s something people believe in, and we thought it’s a positive way for the name of Cooperstown to be out there,” the mayor said. “It’s meaningful in that way. It’s not so meaningful financially. We’re not a $100 million pension fund. No one will suffer if Exxon Mobil triples in the next year.”
He added that he and the trustees didn’t realize Cooperstown would be the first community in the nation to divest itself of all fossil fuels.
But the trustees’ decision, and especially Mr. Allstadt’s comments about driving off a cliff, struck a nerve with a village resident, David Russell, who moved with his family to Cooperstown from Westchester County soon after the terrorist attacks of Sept. 11, 2001. Mr. Russell is an asset manager who commutes to Manhattan, but he is also steeped in pension fund management as a former counsel to the New York state comptroller H. Carl McCall, who oversaw the state’s vast public retirement plan.
“It’s a very pristine place up here,” Mr. Russell told me this week. “Feelings run very high about the environment. A lot of people went crazy over fracking.”
“Lou Allstadt went from being a retired oil executive to a pied piper against fossil fuels, which is fine for him personally,” he added. “But as a trustee, you have to look at this through the lens of fiduciary duty, which means acting in the best interest of the beneficiaries. Village trustees shouldn’t be stock pickers, and they shouldn’t be injecting social issues into the decision.”
“I’d never written anything in the paper before,” Mr. Russell said, “but I felt strongly that someone had to speak up.”
So he drafted a lengthy op-ed for The Freeman’s Journal, arguing that the trustees had a duty to seek the “best risk-adjusted returns” for the fund and should be “free from any conflicts of interest or political beliefs/statements.”
Mr. Russell noted that so far this year, the SPYX fund, minus fossil fuels, had lagged the SPY fund by 16 percent.
He added that stock in the two leading firearms manufacturers — Smith & Wesson and Sturm, Ruger — which were sold off by many pension funds after the 2012 Sandy Hook elementary school tragedy, have risen 400 percent and 100 percent since then, easily outpacing broad market indexes.