Summary of the Current Fossil Fuel Divestment Bill, H.3281
The fossil fuel divestment bill (H.3281), sponsored by Rep. Marjorie Decker and Senator Kenneth Donnelly, requires divestment of the Massachusetts Pension Fund from holdings in coal companies and the creation of a commission to make a recommendation regarding divestment of the Fund from oil and gas companies. 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.
H.3281 has been chosen as a 2017 legislative priority of Environmental League of MA, Sierra Club, Massachusetts Chapter and Climate Action Now.
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 thermal coal and fossil fuel companies within 30 days.
(a) Requires the pension fund to divest from all publicly traded thermal coal companies by December 31, 2017.
(b) Requires the fund to divest from oil and gas companies if so recommended by a commission (set up in Section 4), on a timeline of 1/3 of the fund per year over 3 years.
(c) Prohibits the pension fund from acquiring new assets or securities of thermal coal or fossil fuel companies, if so recommended by the commission.
(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: Sets up a 7 member commission, Chaired by the Treasurer, required to issue recommendations with regard to divestment of the pension fund from oil and gas. The Fund is required to immediately implement any affirmative recommendations of the commission. The timeline for action by this commission will be set by the Committee on Public Service based on when a hearing on the bill is scheduled.
Section 5: Excepts indirect funds from the requirement of divestment. However, the public fund is required to ask the managers of those funds to consider divestment or forming new fossil free funds.
Section 6: Allows the fund to choose investments, funds and fund managers to accomplish fossil fuel divestment, regardless of other existing obligations or conflict of interest laws.
Section 7: 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 8: Indemnifies fund board members, state officers and employees and fund managers for liability for divestment of funds pursuant to this act.
Section 9: Requires the public fund to file a list of all fossil fuel companies in which it has holdings after identification and then annually.
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.
History of Divestment Bills in MA
“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). The current bill is H.3605, filed by Rep. Marjorie Decker and Sen. Kenneth Donnelly in January of 2017. Top environmental groups, faith groups, mothers’ groups, health professionals, college students, state employees and pensioners testified in favor of the bill during the first two legislative sessions. The bills have had approximately 45-50 co-sponsors throughout the legislative sessions.
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 commission bill. The new bill combines allows divestment and the creation of a commission to exist simultaneously, so that divestment of the pension fund from coal can get started while a commission is meeting on oil and gas divestment.