Maine's public retirement system has missed a 2026 deadline to fully divest from fossil fuels set five years ago, to the disappointment of some environmental advocates.
The Maine Public Employee Retirement System (MainePERS) said it has about $1.15 billion invested in the fossil fuel sector as of last June. That's roughly 5% of its total investment portfolio, according to a end-of-year report to the Legislature.
The agency said it stopped making investments in the sector in 2017. Fossil fuels as a share of its portfolio has gradually dropped and will be around 4% by 2028, according to the agency.
But it "does not believe further active divestment from fossil fuels would be in the best financial interests of members as benefit recipients, as further action would conflict with both the trustees’ duty of loyalty and its duty of prudence to our members," MainePERS said in the report.
Under the 2021 law, Maine had to pull its public investments out of fossil fuels as long as it aligned with sound investment criteria and was consistent with its fiduciary obligations. The Maine Office of the Attorney General has repeatedly counseled MainePERS that it is not violating the law as long as it is following its duty to its members. The pension plan covers about 170,000 people, according to the agency.
In its report, MainePERS said it would be prohibitively expensive to immediately remove its exposure to fossil fuels. Selling off publicly held stock, including in Exxon Mobil, NextEra Energy and Berkshire Hathaway would incur massive transaction costs and require an expensive reformation of its investment model, the agency said.
Removing its private investments in fossil fuels would likewise mean selling the entire interest in any private market fund with a fossil fuel asset at a steep loss, according to MainePERS.
"This suggests a discount of nearly $400 million if the system were to dispose of the $2.9 billion of partnerships that hold some fossil fuel investments," it said in the report.
MainePERS CEO Rebecca Wyke in an email iterated the findings of the report and said that the agency "is in compliance with the divestment law."
But climate activists are not satisfied with the agency's findings.
Scott Budde, a financial analyst working with Maine Youth for Climate Justice said MainePERS is obfuscating the facts and shielding itself behind fiscal obligations to avoid taking steps to meet the divestment law.
"They've been portraying divestment as a kind of zero-sum game, where their performance, their investment returns, or the level of risk in their portfolio would somehow be hurt by divestment," Budde said. He noted that the report does not go into detail on the performance of the system's fossil fuel investments, or if other assets could achieve better returns for its members.
"We've found plenty of evidence to indicate that they could make substantial divestment moves and, if anything, their performance might actually be better and it certainly wouldn't be hurt," Budde said.
Meanwhile, Sean Mahoney, director of Conservation Law Foundation's Maine office said that the legal organization was pressing the state's attorney general to revise its legal opinion of MainePERS' obligations under the divestment law.
The law passed five years ago required the pension system to come up with a plan to shed its fossil fuel assets and so far that hasn't happened, Mahoney added.
"They are operating under the assumption that 'trust us' is good enough," Mahoney said. "It's not. What the Legislature said is; we trust you to follow your fiduciary duties and we also think you can divest and continue to meet those fiduciary duties."
