A new bill passed by Maine’s Legislature requiring the state to divest its pension investments and other funds from fossil fuel companies is being hailed by climate activists as a major milestone, fueling optimism that more states and influential institutions could follow.
Once a fledgling protest movement mostly confined to college campuses, the demand for climate-conscious investments has gained momentum and institutional support, with some state and local governments already reducing their investments. Maine is the first state to authorize divestiture, and similar measures to curb or phase out fossil fuel investments are being debated or are in the works in California, New York, Minnesota, and on Beacon Hill.
“It’s beginning to look like there’s kind of a groundswell,” said Richard Brooks, climate finance director for Stand, an environmental group. “It’s a snowball effect. That snowball is accumulating speed and size as it’s rolling down the hill.”
If Maine can divest, Brooks added, “there’s no reason why any other jurisdiction in the United States can’t do it as well, and shouldn’t do it as well.”
Advocates say divesting from fossil fuel companies is one of a number of critical steps that humans must take to combat climate change.
The Maine legislation, which still needs Governor Janet Mills’s signature, would direct the Maine Public Employee Retirement System to divest all holdings in coal, oil, and gas companies. Currently, about $1.3 billion of the $17 billion fund is invested in fossil fuels. The bill also includes divestment from the state treasury’s cash pool and trust funds. The Legislature approved the bill earlier this month.
“We want to make sure that [the pension] fund is healthy and it’s going to be sustainable for generations to come. But we also have an obligation to the planet and to the next generation of people who are going to be managing all of the climate change impacts,” said Maine Senator Cathy Breen, who cosponsored the bill. “What I love about this bill is that it hits the right balance between those two things.”
In some states such as New York, treasury departments have committed to fossil fuel divestiture. Last year, the Minnesota State Board of Investment voted to divest from companies that derive more than a quarter of their revenue from thermal coal.
Activists say Maine’s bill also reflects a moment of national and global organizing.
“We know there is a mass movement of people who are hard at work building those solutions and making sure that there’s political will to cut ties with fossil fuels,” said Lindsay Meiman, a spokeswoman for the climate group 350.
Elsewhere in New England, efforts at the political level have been more modest, even though the region’s college campuses play host to fierce debates on the question of ethical investments. In Rhode Island, General Treasurer Seth Magaziner announced in April that the state’s pension fund reduced its investments in oil and gas by 50 percent. He predicted that the state would be fully divested by 2030, even though there is no mandate from the state legislature to do so. In 2015, Connecticut and Vermont considered divestment bills, but neither state passed the measures into law.
The landscape is complicated in Massachusetts, where cities and towns have backed the movement, but bills directing the state to divest have not found much support on Beacon Hill. Lawmakers and advocates hope Maine’s example will trigger movement in a Democratic-dominated Legislature that can be sluggish on progressive causes.
“Maine legislators deserve enormous praise for this visionary and deeply responsible piece of legislation. Massachusetts should follow suit,” said Deb Pasternak, the Sierra Club’s Massachusetts director. “Pension funds, which are fundamentally about the long term, should divest from the greatest threat posed to our collective future. Let’s hope this inspires more action here in Massachusetts, in New England, and across the entire country.”
Currently, local officials in Massachusetts who want to divest pension funds for their own municipalities can’t do so, state officials have said.
When Somerville’s retirement board sought to divest several years ago, officials with the Public Employee Retirement Administration Commission threw up a roadblock, saying that doing so would violate their “fiduciary duty by constraining the investment options” of the fund. PERAC executive director John Parsons said Thursday that the Legislature must authorize divestment in a particular area.
“Massachusetts is not leading on this and we should be,” said Somerville Mayor Joseph Curtatone, who blamed fossil fuel industry lobbyists wielding influence on Beacon Hill.
A bill by state Representatives Dylan Fernandes, a Falmouth Democrat, and Jay Livingstone, a Boston Democrat, would allow local officials more autonomy to divest. Livingstone argued that it doesn’t make sense that local officials can’t pull funds from fossil fuels even when oil companies are a poor investment — such as in 2020 during the height of the pandemic when the price of a barrel of West Texas crude fell below $0, Livingstone said. His bill was heard in a committee this week, and the Boston City Council has endorsed a similar measure.
“More and more people are realizing that divesting from fossil fuel companies is not only a moral issue, but a fiscally responsible issue,” Livingstone said. “Maine’s actions are consistent with a long line of people doing this type of divestment. And it wouldn’t surprise me if my legislative colleagues are more open to this now.”
Curtatone cited a study indicating that Somerville’s pension fund would have made more money had it been permitted to divest from fossil fuels.
“All you have to do is be able to add,” Curtatone said. “The fossil-free industry is well outperforming the fossil fuel industry.”
Advocates say that it’s critical to make the financial case for divesting in addition to the moral one.
Maine Treasurer Henry Beck said the agency can comply with the new bill without hurting its bottom line. And he predicted the investment world would move away from fossil fuel investments.
“If you were to build a portfolio 40 years ago, no doubt among the top 10 stocks, five would be fossil fuel companies,” Beck said. “That’s not true anymore, and that’s a reflection of changes in the market. Among public funds I think there is going to be a renewed focus on [environmental, social, and governance] investing and responsible investing.”