Divestment can be accomplished through legislative or administrative action.
Massachusetts has a tradition of divesting our pension fund from socially irresponsible investments through legislation. Although those administering the pension fund have historically opposed previous divestment bills, Massachusetts has successfully enacted legislation divesting the fund from companies that do business with Iran, Sudan, Northern Ireland and South Africa, and from tobacco and firearms companies. With our support, legislation divesting the pension fund of fossil fuels must be enacted as well.
The Massachusetts Pension Reserves Investment Trust may also be divested administratively (that is, without legislation), if the PRIM Board were to decide to do so.
Former Massachusetts Treasurer Steve Grossman and 3 other Democratic candidates for Governor stated their support for divestment of the pension fund from fossil fuels during the Gubernatorial race in 2014. Three candidates for Treasurer also supported divestment including the Massachusetts Treasurer Deb Goldberg.
What is the status of divestment legislation?
“An act relative to public investment in fossil fuels”, was first filed by Senator Ben Downing of Pittsfield in 2013 (S.1225) and refiled in January 2015 by Senator Downing (S.1350) and Representative Marjorie Decker of Cambridge (H.2269). It was referred to the Joint Committee on Public Service, where it has spent most of its time. Top environmental groups, faith groups, mothers’ groups, health professionals, college students, state employees and pensioners testified in favor of the bill during both legislative sessions. The bills have 47 co-sponsors.
The fossil fuel divestment bills in both the 2013-2014 and the 2015-2016 legislative sessions were shelved by action of the Joint Committee on Public Service in favor of a fossil fuel divestment study bill. H.2372, sponsored by Representative Aaron Michlewitz, creates an 11 member commission required to report by January 2017 on the advisability of the divesting the pension fund from fossil fuel holdings. H. 2372 was one of the many deserving bills not enacted in the most recent formal legislative session, which ended on July 31, 2016.
The divestment bills will be refiled in January, 2017.
Summary of the Fossil Fuel Divestment Bill
The fossil fuel divestment bill (S.1350/H.2269) requires divestment of holdings of $1.4 billion in coal, oil and gas companies from the Massachusetts Pension Fund. Much of the language of the fossil fuel divestment bill tracks that of legislation to divest the Pension Fund from companies that do business with Iran and Sudan–language agreed to by the Pension Board.
Section 1: Definitions. The definition of a “fossil fuel company” was added to the bill in the 2015 legislation: “a company that is identified by a Global Industry Classification System code in one of the following sectors: (1) coal and consumable fuels; (2) integrated oil and gas; (3) oil and gas exploration and production”.
Section 2: Requires the Pension Fund to identify all holdings in fossil fuel companies within 30 days.
(a) Requires the pension fund to divest from all publicly traded fossil fuel companies within 5 years, at a rate of 20% divestment per year.
(b) Prohibits the pension fund from acquiring new assets or securities of fossil fuel companies.
(c) Excepts indirect holdings from the requirement that the public fund divest from fossil fuel companies. However, it requires that the public fund contact the fund managers of the indirect holdings invested in fossil fuels to request that they consider removing the fossil fuel companies from the investment fund or creating a similar fossil fuel free fund.
Section 4: Exempts the public fund from any conflicting legal obligations.
Section 5: Permits the public fund to reinvest or to remain invested in fossil fuel companies if the total value of public fund assets is reduced to 99.5% of the hypothetical value of the fund assuming there had been no divestment. This permission is limited to the minimum steps necessary to avoid this contingency. The public fund is required to report the reasons for reinvestment or remaining invested in fossil fuel companies, updated semi annually, if applicable.
Section 6: Requires the public fund to file a list of all fossil fuel companies in which it has holdings after identification and then annually.