Maine Public Employee Retirement System currently has $1,272,274,408 invested in fossil fuel companies, as of 12/31/2020. Yes, that is more than $1 billion invested in coal, oil, and fracked gas. For most of us at Sierra Club Maine, this flies in the face of our long-standing efforts to close coal-fired power plants, stop new pipelines, and promote the production of local clean energy. As the Executive Committee Vice-Chair for Policy, I have taken a personal interest in pushing MainePERS to divest from fossil fuels.
Last year for Earth Day, I led a webinar on this topic with Maine Youth for Climate Justice and MaineStrikes. In that webinar, I discussed my assessment of the MainePERS holdings, including their private equity investments. These investments include every aspect of the fossil fuel industry, from coal mining to coal-fired power plants, tar sands oil extraction, oil and gas fracking, pipelines, refineries, and seemingly everything else in between.
Throughout this year’s legislative session, I have collaborated with Representative Maggie O’Neil, 350Maine, Maine Youth for Climate Justice, and others to advocate for divestment. As drafted, LD 99 would require MainePERS to divest from the “200 largest publicly traded fossil fuel companies, as established by carbon in the companies' proven oil, gas and coal reserves.” While this is an admirable first step, it would only affect ~$100 million of the $1.27 billion in total fossil fuel investments. Primarily, this would miss all of the MainePERS private equity investments, which account for $881 million of the $1.27 billion. This would also miss all of the related businesses - refineries, pipelines, oilfield services, and power plants - that are clearly part of the fossil fuel industry but do not have reserves in the ground. I worked closely with Rep. O’Neil to draft an amendment to the bill that would encompass divesting ALL of the MainePERS fossil fuel investments.
I started out working on this issue from purely a climate and social-justice perspective: these investments are funding the leading cause of climate change, and funding asthma, cancer, and numerous other horrors for Indigenous peoples and low-income communities around the world. However, the more I dove into the details, the more I realized just how much these fossil fuel investments are already losing, and how much that is costing public employees across Maine. Both of my parents, my brother, and several members of my extended family are teachers in Maine, dependent on the success of MainePERS for their retirement.
Supplemental testimony from MainePERS clearly shows the losses suffered due to their fossil fuel investments. In the past year, their fossil fuel investments lost 9.45%, dropping $133 million from $1,410,536,764 to $1,277,274,410. Over that same time period, the remainder of the MainePERS portfolio gained 9.17%. Sierra Club Maine calculations show that if these fossil fuel holdings had been divested a year ago and achieved the same 9.17% return, they would have gained $129 million instead of losing $133 million. Together, this equates to a $262 million net cost to the Maine Retirement system for continuing to invest in fossil fuels over the past year. With approximately 100,000 PERS members across the state, this could have provided an additional $2,600 per member for their retirement. (This paragraph is an excerpt from Sierra Club Maine’s Press Release dated 4/1/21).
MainePERS testimony repeatedly claimed that it is unconstitutional for the legislature to require divestment. “Once money is placed into trust, the Maine Constitution, the highest law in Maine, prohibits the investment of this money by MainePERS or the Legislature for any purpose other than to pay member pensions. Simply put, MainePERS is entrusted and restricted by law to make investment decisions which are in the best financial interest and only the best financial interest of paying pensions. This is called the “exclusive benefit” rule, and is the reason US pension funds do not invest, or divest, for any purpose other than to earn money for current and future retirees.” The actual text of the State Constitution is in Article IX, Section 18.
This claim from MainePERS led the Labor & Housing Committee to send a letter to the state Attorney General Aaron Frey for clarification of the constitutionality of the bill. Just a few days before the work session, the Attorney General replied to the committee saying that his interpretation is that the bill would be unconstitutional. I found this ironic since AG Frey had not been provided with any information on the performance of these fossil fuel investments. Clearly, continued losses in the fossil fuel sector (going back to 2014) are not providing benefits for the PERS members!
At the Committee Work Session on April 14th, the committee adopted the amendment that I worked on with Representative O’Neil and voted 7 in favor and 5 against, passing the bill as amended. Four Republicans and Democratic Representative Scott Cuddy voted against the bill. Before leaving the committee, the legislation needs a final language review, which may include a review by the Attorney General. Then it will need to be voted on by the full legislature and signed by the governor. There is still work ahead, but this marks a significant step forward in the effort to stop funding the fossil fuel industry.
With this amendment, we expanded the divestment requirement to encompass all $1.27 billion of MainePERS’ fossil fuel investments. I drafted these definitions, which were adopted into the final bill:
B. Fossil fuel. “Fossil fuel” means coal, petroleum, natural gas or any derivative of coal, petroleum or natural gas that is used for fuel.
C. Fossil fuel infrastructure. “Fossil fuel infrastructure” means oil or gas wells, oil or gas pipelines and refineries; oil, coal or gas-fired power plants; oil and gas storage tanks; fossil fuel export terminals; and any other infrastructure used exclusively for fossil fuels.
D. Fossil fuel company. “Fossil fuel company” means any company that:
- is among the 200 publicly traded companies with the largest fossil fuel reserves; or
- is among the 30 largest public-company owners of coal-fired power plants; or
- owns any fossil fuel infrastructure; or
- has as its core business the exploration, extraction, refining, processing or distribution of fossil fuels; or
- receives more than 50% of gross revenue from companies that fall within subparagraphs 1, 2, 3 or 4.
We also split apart the ban on future investments in fossil fuels from the requirement to divest current fossil fuel investments. This will provide severability, in case the courts strike down part of the legislation. To my knowledge, this will be the most stringent divestment bill to pass through any state legislature. Similar legislation was introduced in New York last year, but the New York Comptroller announced a full divestment plan before the legislation passed.
Please reach out to your state representatives, and encourage them to support LD 99. This will stop MainePERS investments in the fossil fuel industry, reduce carbon emissions, and protect state employees from continued losses in the fossil fuel sector. Fossil fuel companies are almost certain to continue to decline in value as Maine, the United States, and other countries take ambitious action to address climate change. A recent piece by Bill McKibben in the New Yorker reviews a report conducted by investment giant BlackRock. Their report looked at organizations that have already divested from fossil fuels. They found that in the worst case, divestment had no impact on financial performance, and in most cases had a positive impact on financial performance. No organizations that have divested from fossil fuels have seen a decline in their financial results!
I would also encourage all of you to check your retirement plans and ensure that your personal IRA’s, 401(k)s, and other retirement investments are fully divested from fossil fuels. https://fossilfreefunds.org/ is a great website where you can input a mutual fund to see what exposure it has to fossil fuel companies. The Forum for Sustainable and Responsible Investment (https://charts.ussif.org/mfpc/) provides information on a wide variety of socially responsible mutual funds, including their financial performance and the types of screening and advocacy they participate in. Now is the time to review your personal retirement portfolio and make sure that you are divested from fossil fuels! I am happy to answer questions or provide more information to anyone interested.
David Gibson can be contacted by email: davidgibson1@gmail.com