A few weeks ago, Jeff Johnson and Greg Devereux urged the Washington State Investment Board to divest from fossil fuel companies, arguing it would improve pension returns and help fight climate change. (“WA pension plans should divest from fossil fuel companies,” July 10)
The authors are deeply respected civic leaders. We share their commitment to climate action. But on this question, the evidence cuts decisively the other way — and the stakes for Washington’s 900,000 public employees, teachers, firefighters and police officers deserve a thoughtful response in the public square.
We write from hard-earned experience on both sides of this ledger. One of us (Reuven) spent 14 years in the Legislature, authoring and leading passage of the two most consequential climate laws in Washington history — the Clean Energy Transformation Act of 2019 and the Climate Commitment Act of 2021. The other (Mark) spent 13 years in the state Senate, served eight years on the Washington State Investment Board and helped lead negotiations on a comprehensive transportation and climate funding package requiring coalitions across labor, industry and government. We are both deeply committed to fighting climate change. We are both opposed to inserting political criteria into the independent system our state depends on to fund pension promises to police, firefighters, teachers and thousands of other public servants.
Two institutions, two missions
Watch what President Donald Trump has done to the Federal Reserve: meddling in monetary policy, pressuring an independent institution and undermining the credibility that makes it function. It is a cautionary tale and not an isolated one. When New York City’s pension funds were pushed to divest from Israeli-linked holdings under BDS pressure — Boycott, Divest, Sanctions — their fiduciaries spent months defending the legal principle that pension assets exist for beneficiaries, not politics. When several state legislatures tried to mandate ESG — Environmental, Social, and Governance — exclusions, banning funds from even considering climate and water risk, courts and investment officers pushed back on identical grounds. Political mandates imposed on independent investment boards, from the left or the right, corrode the same foundational principle: these assets belong to retirees, managed by professionals with fiduciary obligation, not by whoever holds power this election cycle.
The Washington State Investment Board was built with precisely this insulation. Its sole legal mandate is fiduciary: protect and grow assets for pension beneficiaries, reducing risk for taxpayers who would otherwise be obligated to make up the difference. That independence is not a technicality. It is the structural guarantee that retirement security is managed on investment merit, not prevailing political sentiment.
The Legislature has its lane and has used it boldly. The cap-and-invest program, created in 2021 and sustained by 62% of voters in 2024, is deploying $4.7 billion across 2,700 projects in virtually every community in the state by 2027. We should not conflate the two institutions or ask either to do the other’s job.
Extraordinary record, worth protecting
Over 25 years, the WSIB’s Commingled Trust Fund has generated a net return of 8.1%, surpassing its peer group median of 6.9% — translating to approximately $32.5 billion in excess net returns. According to the CEM benchmarking analysis cited by the original authors, the WSIB has returned 9.1% annually over the past decade against a peer average of 7.4%, producing an additional $17.2 billion in the past five years alone. Last year’s return was 9.6%, and the fund has grown from $137 billion in 2021 to $166 billion in 2025, ranked among the top-performing pension funds in the country over both 10- and 20-year periods.
This performance is not an accident. It is the product of disciplined, diversified investing unconstrained by political mandates. That freedom is what allows Washington to be among the best-funded state pension systems in the nation, meaning lower required contributions from employers and employees alike. If political mandates degrade that outperformance — even ones we may be philosophically aligned with — only three options remain: cut pension benefits and break promises to our public workforce; reduce state services like healthcare and K-12 education; or raise taxes. There is no fourth option.
The California lesson
CalSTRS’s own chief investment officer stated publicly that full fossil fuel divestment could result in a $20 billion loss to that pension fund. CalSTRS divested from tobacco in 2001, a decision that translated to approximately $4.3 billion in lost returns over the following two decades. Studies of fossil-free portfolios over long time horizons show they would not have “significantly underperformed” — but compounded across decades over a fund the size of the WSIB’s, even modest underperformance produces staggering consequences.
The research is unambiguous
The case for divestment rests on the theory that pulling capital from fossil fuel companies raises their cost of capital, constrains their operations and ultimately reduces emissions. Professors Jonathan Berk of Stanford and Jules van Binsbergen of the Wharton School studied this mechanism rigorously and found that the impact on the cost of capital is too small to meaningfully affect real investment decisions. When a pension fund sells its shares, another buyer — with no climate commitments — purchases them at essentially the same price. Berk and van Binsbergen found no detectable effect on the cost of capital when firms were added or removed from leading socially conscious indices, and concluded that to have real impact, socially conscious investors should stay invested and exercise their rights of control to change corporate policy.
The WSIB exerts pressure
As a major shareholder, the WSIB votes at thousands of annual meetings each year, using proxy rights to push companies toward long-term sustainability. It coleads campaigns within Climate Action 100 +, engaging Washington-based companies on emissions targets and climate disclosure. Shell’s 2021 annual general meeting marked the energy sector’s first-ever shareholder advisory vote on a company’s energy transition strategy — a direct result of sustained investor engagement through Climate Action 100+, which represents investors with $54 trillion in assets. The resolution received nearly 89% of shareholder votes. The WSIB was part of the coalition that made it possible. If Shell retreats from those commitments, institutional shareholders will push back. That leverage disappears the moment you sell the shares.
Divestment generates a news release. Engagement moves corporate policy. One requires a seat at the table; the other surrenders it.
Serving both missions
Washington has built world-class institutions in both climate policy and pension management. The right answer is not to choose between them — it is to exercise both responsibilities through the institutions designed for each.
Our teachers, firefighters, and police officers have earned their retirement. They depend on the WSIB’s independence to deliver on that promise. We should not ask it to sacrifice returns for a strategy that the best available research shows will not reduce a single ton of emissions.
Lead on climate through the Legislature. Lead on pension management through the WSIB. Washington can do both.
