Some Massachusetts lawmakers want the state to join a growing national movement that is fighting climate change by pressuring institutional investors such as pension funds and university endowments to divest holdings in companies that produce, distribute, and support fossil fuels.
Fossil fuels include oil, natural gas, and coal, which, when burned, produce carbon dioxide, the major culprit in climate change. Earlier this week, the Legislature held its first hearing on a bill that would require the state pension fund to unload over five years some $1.4 billion in investments — about 2.6 percent of the $54.4 billion fund — in oil companies, mining companies, refiners, and similar corporations. An estimated 200 people rallied in support of the bill in front of the State House Tuesday.
If the legislation is approved, Massachusetts would become the first state in the nation to divest its fossil fuel holdings, said state Senator Benjamin B. Downing, a Pittsfield Democrat sponsoring the bill. He argued that divestment makes economic sense given the quickening adoption of wind, solar, and other renewable energy sources.
“At some point, those fossil fuel companies will not be a good investment, and that will have an impact on our pension fund,” Downing said. “We need to transition away.”
The bill’s chances of success are unclear, but environmental advocates view it as significant step in a movement that began in earnest a little more than a year ago and has spawned divestment campaigns on more than 300 university and college campuses, including Harvard, Brown, and the University of Massachusetts.
The campaign to divest fossil fuel holdings follows a long tradition of trying to use economic pressure to force social change.
New England has moved to the forefront of the movement, with five small colleges, including Hampshire College in Amherst, among the first in the nation to move away from fossil fuel investments. In addition, city councils in Cambridge, Northampton, and Providence have passed resolutions calling on retirement boards and investment officials to divest fossil fuel holdings.
Downing’s bill brings statewide attention to the issue and puts a sharp focus on Massachusetts’ contradictory polices, said Sue Reid, Massachusetts director of the Conservation Law Foundation, a Boston-based environmental advocacy group. The state has committed millions to clean technology and energy efficiency programs aimed at combating climate change, but it continues to invest in companies and activities that accelerate it.
“This is about aligning the Commonwealth’s own investments with its clean energy policies,” Reid said. “Ongoing reliance on fossil fuels and supporting mining, refining, and burning of fossil fuels is fundamentally at odds with the clean energy trajectory that we’ve set for ourselves.”
Michael G. Trotsky, executive director of the Massachusetts Pension Reserves Investment Management Board, said in a recent letter to legislators that a requirement to divest from fossil fuels would add a “significant administrative and operational burden and cost.”
The campaign to divest fossil fuel holdings follows a long tradition of trying to use economic pressure to force social change. Other divestment targets in the past have included South Africa’s former apartheid government, tobacco companies, and a Sudanese government pursuing genocide in the Darfur region.
Carlton Carroll, a spokesman for the American Petroleum Institute, an oil and gas industry trade group, called efforts to divest from fossil fuels preposterous, particularly given the returns the industry generates for college endowments, pension funds, and other investors. ExxonMobil’s stock price, for instance, has appreciated at roughly twice the rate of the S&P 500.
In addition, Carlton said, a revolution in energy technology has led to a boom in US oil and gas production that has the potential to generate significant tax revenues and jobs.
“It does a disservice to our nation’s pursuit of long-term energy security and to the thousands of families that rely on the substantial investment returns provided to college endowments by the oil and natural gas industry,” Carroll said in a statement. “It’s not a matter of whether we need oil and natural gas to fuel our economy, but where will we get it. “
Efforts to divest fossil fuel holdings have built on the work of author and environmental activist Bill McKibben to address the climate crisis. The movement gained momentum after Rolling Stone published an article by McKibben last year in which he wrote that the known reserves of the top 200 energy companies contain five times as much carbon as climate scientists say is safe to burn without disastrous effects.
In New England, several colleges are moving their investments out of fossil fuels: Hampshire College in Massachusetts , Unity College and the College of the Atlantic in Maine, and Sterling and Green Mountain colleges in Vermont.
Sterling completed its divestment in July. Since its $1 million endowment was invested in mixed funds, where it was impossible to separate fossil fuel holdings, the college transferred its entire endowment to a fossil-fuel free portfolio at Trillium Asset Management Inc. of Boston.
Earlier this week, Mayor David J. Narkewicz of Northampton signed a City Council resolution calling for the divestiture of fossil fuel holdings, a tiny fraction of the city’s investments. “The president is talking about it, there’s legislation,” Narkewicz said. “We’re trying to do what we can at the local level to move that conversation forward.”
Henry Lee, director of the environment and natural resources program at Harvard’s Kennedy School of Government, said he does not personally agree with divestment because picking which companies are morally OK to invest in can be a slippery slope, given that morality is relative and changes with the times.
But, he said, such divestment campaigns “make a big difference in . . . getting people worked up and thinking about the problem. That’s the goal.”