Massachusetts pension fund joins climate fight

The board that oversees the state’s $104.1 billion pension fund voted on Thursday to start using its shareholder power to pressure companies to take action on climate change.

The Massachusetts Pension Reserves Investment Management Board, which is chaired by State Treasurer Deborah Goldberg voted unanimously in favor of the new guidelines, which essentially turn pension fund managers into shareholder-activists. It asks them to vote against all the directors of the companies in which the fund is invested if they do not make plans to keep warming to 1.5 degrees Celsius or achieve net zero emissions by 2050.

The pension fund vote is an alternative to fossil fuel divestment, a step several local and institutional funds have taken in recent years, and which the state of Maine decided to take this summer. Instead of taking money away from every company involved in the fossil fuel industry, the Massachusetts pension fund will try to transform the business practices of the companies it invests in from within, urging them to reduce their emissions and to align with the objectives of the Paris Climate Accord.

“This vote not only benefits our retirees and taxpayers with its positive environmental outcomes, but has significant potential to increase our bottom line,” Goldberg said in a statement. “This is a more active approach to achieving our financial goals while having a productive long-term impact on our changing climate.”

If a company in which the fund is invested fails to provide a plan aligned with the goal of limiting warming to 1.5 degrees Celsius, or if it fails to develop a plan to achieve net zero emissions by 2050, the new guideline would require fund administrators to vote against the company board members. The message: align yourself with ambitious climate goals or risk losing your place on your company’s board.

There is recent precedent for this kind of action. In May last year, a small, activist hedge fund successfully overthrew at least two Exxon Mobil Corp board members. with the aim of forcing the company to align its activities with the fight against climate change.

Ahead of the vote, the union SEIU Local 509 — which represents 20,000 health and human services workers and educators, including 8,000 state workers — wrote in support of the move.

“Extreme heat, dangerous storms, wildfires, floods, droughts and the rest affect us all, but those with fewer resources and less energy are affected more, and the situation is getting worse,” wrote union president Kathleen Flanagan and president Peter MacKinnon. “We don’t want our retirement funds used to continue this destruction.”

To have a decent retirement, they wrote, they “need a livable world to retire on.”

In addition to the proxy voting measure on climate change, the pension fund voted to create an environmental, social and corporate governance committee made up of industry experts. The committee’s goal — which the board says was a first national effort — will be to focus on how to use the fund to promote worker safety, foster diversity and fight climate change, while maintaining and increasing the size of the fund.

Mary Cerulli of the Boston-based group Climate Finance Action has worked with Goldberg for years to help leverage the fund to fight climate change. “These voting guidelines are a great move for Massachusetts and other state treasurers and comptrollers should follow suit,” she said.

Mindy Lubber, chief executive and president of Ceres, a Boston-based group that promotes climate action in the corporate world, said Thursday’s vote adds the Massachusetts pension fund to the group of shareholders who have warned companies and their directors “that if they fail to address the risks associated with climate change and implement climate practices and policies that will contribute to the transition to a net-zero emissions economy, these shareholders will hold them accountable.”

Sabrina Shankman can be reached at [email protected] Follow her on Twitter @shankman.

Dolores W. Simon