A new state law calls for Maine's public employee retirement system to divest its assets from fossil fuels by 2026. But system officials say constitutional constraints have limited their efforts to meet that goal.
The 2021 law called for the Maine Public Employees Retirement System to end future investments in fossil fuel companies, and divest from current holdings by Jan. 2026, "in accordance with sound investment criteria and consistent with fiduciary obligations."
At a meeting with lawmakers Tuesday afternoon, MainePERS CEO Rebecca Wyke explained that while some progress has been made in moving away from fossil fuels, fully eliminating those investments would conflict with the system's "fiduciary duties" to pensioners, as laid out in the state constitution.
Wyke and other officials said that its priority was protecting the interests of beneficiaries, which meant holding onto shares of the entire market, without excluding specific industries.
"What we're trying to do is, between the rock and the hard place of this law, and the fiduciary duty of the trustees, is to navigate it as best we can. Which is why we spent a year looking at it, both with an outside consultant, and bringing in the attorney general's office, once we had that information, to navigate it," Wyke said.
According to its latest report, MainePERS said it has reduced its fossil fuel exposure to about 6.5%. The system said that it doesn't anticipate making any future commitments to fossil fuel-focused funds, and it expects to reduce its exposure by a third by 2026.
But at Tuesday's meeting, some Democratic lawmakers cited an analysis saying that a divested public market portfolio would have performed equally or better than the current one, over a decadelong period. Democratic state Rep. Amy Roeder of Bangor also pointed to the negative performance of certain fossil fuel infrastructure within certain investment funds contained in the system's holdings.
"I'm really concerned about anything that is a loss of that magnitude. Because we did hear, over and over again, that fiscal responsibility is the prime driver of the choices. And must always be the prime driver of the choices," Roeder said.
MainePERS officials said that it would be more expensive to move to fossil-fuel-free investments, and the best long-term strategy is to broadly diversify the portfolio, without excluding certain sectors.
A group of activists are planning to hold a rally later this week calling for MainePERS to take additional steps that they say are needed to comply with the 2021 law.
