Activists and Maine Public Employee Retirement System at odds over fossil fuel divestment progress

Roughly 50 activists and beneficiaries of the Maine Public Employee Retirement System demonstrated outside its office in Augusta on July 11 to demand its board fully divest the system from fossil fuels. (Emma Davis/ Maine Morning Star)

Roughly 50 activists and beneficiaries of the Maine Public Employee Retirement System rallied in Augusta on Thursday outside the MainePERS board meeting to demand that its members make more progress in fully divesting from fossil fuels. However, according to MainePERS officials, the system has made the changes required by state law.

“We felt like we were making progress but after this last rebuttal that was released, it’s clear that it was superficial progress,” said Hope Light, campaign manager for Divest Maine, the coalition of MainePERS beneficiaries and climate advocates, associated with groups such as the Sierra Club and Third Act Maine , behind the demonstration.

At the request of the coalition, MainePERS had agreed to look into public equity indexing approaches that balance financial targets and lower fossil fuel exposure, which have been used by other pension funds, such as CalSTRS. However, in a board of trustees public meeting packet released this week, MainePERS concluded that its current passive approach to investing in public equities remains optimal for meeting the system’s investment goals.

“This approach allows the System to hold a very well diversified portfolio of over 5,000 companies and to benefit from the broad spectrum of economic growth opportunities at very low cost,” the document reads, adding that shifting into non-benchmark strategies would result in uncertain portfolio outcomes.

This conflict over public equity indexing is the latest in an ongoing effort by Divest Maine to adhere to requirements that the state Legislature passed in 2021 for MainePERS to divest from fossil fuels beginning in 2026 and cease any additional investment in oil and gas holdings, in light of the link between fossil fuels and climate change and increasing efforts to transition to renewables.

However, the law conditioned its directive to divest in “accordance with sound investment criteria” and “consisten[cy] with fiduciary obligations.”

Divest Maine members argue that divestment fits within retirement systems’ fiduciary duties because the renewable energy transition means fossil fuel investments are becoming increasingly likely to lose value .

Meanwhile, MainePERS argues that fully divesting from fossil fuels by 2026 would violate the system’s fiduciary duty to pension holders — its constitutionally-mandated obligation to act in the best financial interests of members.

Sue Inches, an educator and environmental advocate, addressed the crowd Thursday as a member of MainePERS. “But interestingly, membership does not mean I have any choice in how that money is invested,” Inches said.

Inches said the issue boiled down to cost, risk and “what I call the moral question.” Pointing to high storm damage and fuel costs as the effects of climate change worsen, Inches said “continuing to invest in fossil fuels is rooting for the future destruction of our planet.”

Thursday’s event was the latest action by the coalition, which held a similar rally in March arguing that MainePERS was not on track to comply with the law.

In a statement shared with Maine Morning Star on Thursday, MainePERS wrote that it has implemented the law, as reported to the state Legislature in a January 2023 divestment report and December 2023 divestment report.

In a presentation to the Legislature’s Labor and Housing Committee about divestment in March, MainePERS officials said the system’s fossil fuel investment exposure fell from 7.8% of the fund’s assets in 2022 to 6.5% in 2023, decreasing by $193 million. MainePERS’ exposure to fossil fuels is likely to decline by a third by 2026 as investments expire, the officials estimated. However, MainePERS CEO Rebecca Wyke said that fully divesting would not be in the best financial interests of beneficiaries.

In the statement on Thursday, MainePERS pointed out that the attorney general raised this limitation with the committee in April 2021 during early discussions of the proposal, and again in a December 2022 letter from the Attorney General’s Office to MainePERS.

“MainePERS expended considerable resources and spent the better part of a year working

diligently to explore the financial implications of alternative strategies to avoid fossil fuel

investments and then looked to our counsel in the Attorney General’s Office to help us navigate the legal issues guiding the fiduciary duty of the Board of Trustees in implementing the new law,” the statement read.

Light, who joined as campaign manager in early spring, said the coalition has been moving toward more formalized action to pressure MainePERS to make more progress in divesting from fossil fuels and will decide next steps after the rally.

The group rallying Thursday, which ranged in ages, concluded the event with a song summarizing their stance.

“We’ll have a say so, in how our money grows, in our retirement plan,” the crowd sang. “We who are older, we’re getting bolder, foot dragging we refuse, and we who are youthful, we must be truthful, we’ve got the most to lose.”

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