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FOSSIL FUEL DIVESTMENT TAKES CENTER STAGE
Mass Retirees Supports Formal Study, Urges Caution
JUNE 10, 2015: On Tuesday, the complex issue of public pension fund divestment of fossil fuel investments took center stage at the Massachusetts State House.
At a packed to capacity hearing before the Joint Committee on Public Service, divestiture proponents laid out a case for a systematic approach to removing fossil fuel investments from public pension portfolios over a 5-year period. Proponents site both the impact of fossil fuels on climate change, as well as a concern that fossil fuel investments might be overvalued, thus creating a pending economic bubble that could suddenly burst.
Mass Retirees Legislative Director Shawn Duhamel testified early in the hearing, stating the position of our Association – which is to create a special study commission aimed at a fact-finding investigation of the issue.
“Our Association shares the concern regarding climate change and any economic condition that could negatively impact our pension systems, but we can’t operate in a vacuum. It’s important that Massachusetts gets this issue right,” testified Duhamel. “With more than 60% of pension system revenues coming from investment returns, too much is at stake here. A study commission, comprised of experts and stakeholders, will be able to establish a set of facts from which the Legislature can formulate the best policy.”
H2372, filed by Rep. Aaron Michlewitz (D-North End) would create a special commission to closely examine the issue and report back to the Legislature late this year.
Across the country an ongoing debate exists in both the public and private investment sectors over whether or not to divest of fossil fuel investments. Some argue that the best course of action is to remain invested in companies like Exxon-Mobil and use proxy-voting power to engage change from within. Others are convinced that divestment is the answer.
In Massachusetts, legislation sponsored by Senator Ben Downing (D-Pittsfield) and Rep. Marjorie Decker (D-Cambridge) calls for gradual divestment from public pension funds over five years. Decker and Downing, who are close allies of our Association, have also cosponsored Michlewitz’s bill creating a study commission.
“We must urge caution anytime new policies are being proposed that could have a negative impact on our pension assets and funding schedules. As fiduciaries, our responsibility is to the members of the retirement system, for whom pension funds are a critical lifeline,” explained Duhamel, who is also a member of the Town of Plymouth Retirement Board. “At the end of the day the Commission might recommend divestment or it may not in favor of another option. This really is new territory and we have to get it right.”
Approximately 8% (roughly $5 billion) of the Commonwealth’s $62 billion Pension Reserves Investment Trust (PRIT) Fund is in fossil fuel investments. Ninety-two local and agency retirement systems invest all or some of their pension assets in PRIT.