Massachusetts 2023-2024 Regular Session

Massachusetts House Bill H2504 Compare Versions

Only one version of the bill is available at this time.

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1	1	1 of 1
2	2	HOUSE DOCKET, NO. 3725 FILED ON: 1/20/2023
3	3	HOUSE . . . . . . . . . . . . . . . No. 2504
4	4	The Commonwealth of Massachusetts
5	5	_________________
6	6	PRESENTED BY:
7	7	Mindy Domb
8	8	_________________
9	9	To the Honorable Senate and House of Representatives of the Commonwealth of Massachusetts in General
10	10	Court assembled:
11	11	The undersigned legislators and/or citizens respectfully petition for the adoption of the accompanying bill:
12	12	An Act to mandate the review of climate risk in order to protect public pension beneficiaries and
13	13	taxpayers.
14	14	_______________
15	15	PETITION OF:
16	16	NAME:DISTRICT/ADDRESS :DATE ADDED:Mindy Domb3rd Hampshire1/20/2023Lindsay N. Sabadosa1st Hampshire1/20/2023 1 of 10
17	17	HOUSE DOCKET, NO. 3725 FILED ON: 1/20/2023
18	18	HOUSE . . . . . . . . . . . . . . . No. 2504
19	19	By Representative Domb of Amherst, a petition (accompanied by bill, House, No. 2504) of
20	20	Mindy Domb and Lindsay N. Sabadosa relative to public pension fund divestment from climate
21	21	risk investments and negative economic impacts from carbon producing industries. Public
22	22	Service.
23	23	[SIMILAR MATTER FILED IN PREVIOUS SESSION
24	24	SEE HOUSE, NO. 4170 OF 2021-2022.]
25	25	The Commonwealth of Massachusetts
26	26	_______________
27	27	In the One Hundred and Ninety-Third General Court
28	28	(2023-2024)
29	29	_______________
30	30	An Act to mandate the review of climate risk in order to protect public pension beneficiaries and
31	31	taxpayers.
32	32	Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority
33	33	of the same, as follows:
34	34	1 SECTION 1. Chapter 29 of the General Laws is hereby amended by adding the following
35	35	2section:-
36	36	3 Section 72. (a) As used in this section the following words shall, unless the context
37	37	4clearly requires otherwise, have the following meanings:-
38	38	5 “Biofuel”, any fuel made from biomass.
39	39	6 “Board”, the pension reserves investment management board established pursuant to
40	40	7section 23 of chapter 32. 2 of 10
41	41	8 “Climate risk investments,” any fossil fuel investments or investment in other industries,
42	42	9including, but not limited to biofuel, that may have a negative impact on the global climate, that
43	43	10scientific evidence has established as contributing to climate change, that conflict with or
44	44	11undermine the commonwealth’s climate goals, and that pose a risk to the portfolio performance
45	45	12for beneficiaries of the public fund.
46	46	13 “Committee”, the climate risk investment review committee established pursuant to
47	47	14subsection (c).
48	48	15 “Direct holdings”, all securities of a company held directly by the public fund or in an
49	49	16account or fund in which the public fund owns all shares or interests.
50	50	17 “Fossil fuel investments”, any stocks or other securities of a corporation or company
51	51	18within the fossil fuel industry or any subsidiary, affiliate or parent of any corporation or company
52	52	19among the 200 largest publicly traded fossil fuel companies, as established by carbon in the
53	53	20companies’ proven oil, gas and coal reserves.
54	54	21 “Indirect holdings”, all securities of a company held in an account or fund, such as a
55	55	22mutual fund, managed by 1 or more persons not employed by the public fund, in which the
56	56	23public fund owns shares or interests together with other investors not subject to this section or
57	57	24section 23C of chapter 32.
58	58	25 “Public fund”, the Pension Reserves Investment Trust or the pension reserves investment
59	59	26management board in charge of managing the pooled investment fund consisting of the assets of
60	60	27the state employees’ and teachers’ retirement systems as well as the assets of local retirement
61	61	28systems under the control of the board. 3 of 10
62	62	29 (b) This section applies only to direct and indirect holdings by the public fund.
63	63	30 (c) There shall be within the office of the treasurer, but not subject to its supervision or
64	64	31control, a Climate Risk Investment Review Committee consisting of the following 11 voting
65	65	32members: the state treasurer or a designee, who shall serve as chair; the secretary of
66	66	33administration and finance or a designee; the comptroller or a designee; the executive director of
67	67	34the public employee retirement administration commission; the executive director of the pension
68	68	35reserves investment management board; 1 individual appointed by the governor, who shall be in
69	69	36a position to oversee implementation of chapter 8 of the acts of 2021; 2 individuals appointed by
70	70	37the treasurer, 1 of whom shall be an expert in state public finance and 1 of whom shall be an
71	71	38expert in divestment planning; and 1 individual appointed by the secretary of energy and
72	72	39environmental affairs who shall be a climate scientist. The
73	73	40 house and senate chairs and the ranking minority members of the joint committee on
74	74	41environment, natural resources and agriculture shall be nonvoting members of the committee.
75	75	42Each individual appointed by the governor, treasurer and secretary of energy and environmental
76	76	43affairs shall serve terms established by the appointing authority, but not longer than 4 years.
77	77	44Each appointed individual may serve a second or subsequent terms, and each appointed
78	78	45individual may continue to serve after the individual’s term expires if desired by the appointing
79	79	46authority. The state treasurer shall determine the necessity of and calculate the amount of funds
80	80	47needed to compensate members for their participation. Funding shall be included in the state
81	81	48treasurer’s request for funding as part of its budget process.
82	82	49 (d) The chair shall call meetings of the committee every 8 weeks; provided, however, that
83	83	50the chair may call meetings of the committee more frequently if the chair determines that more 4 of 10
84	84	51frequent meetings of the committee are necessary to perform its duties. The chair shall call the
85	85	52first meeting of the committee within 4 weeks following the effective date of this section.
86	86	53 (e) (1) The committee shall: (i) study and review on a continuing basis the risk associated
87	87	54with all investments made by the board in any climate risk investments; and (ii) assess the
88	88	55readiness of the public fund for the purposes of implementing the sale, redemption, divestment or
89	89	56withdrawal of climate investments. The committee shall, in accordance with sound investment
90	90	57criteria and consistent with the committee's fiduciary obligations, take into account that climate
91	91	58risk investments have financial risks to pension beneficiaries and the commonwealth’s taxpayers.
92	92	59The committee shall provide recommendations and a series of decisions to mitigate those risks
93	93	60through an active decarbonization of the pension portfolio.
94	94	61 (2) The committee shall, on or before 180 days after the effective date of this section,
95	95	62develop a plan to sell, redeem, divest or withdraw from climate risk investments, or any other
96	96	63investment as determined by the committee, that are not aligned with the commonwealth’s
97	97	64climate goals. The plan shall detail how to expeditiously sell, redeem, divest or withdraw from
98	98	65climate risk investments that contribute toward greenhouse gas emissions, and from 100 per cent
99	99	66of these investments not later than January 1, 2026 pursuant to clause (2) of subsection (c) of
100	100	67section 23C of chapter 32.
101	101	68 (f) Annually, not later than December 15, the committee shall file a report with the board,
102	102	69the governor and the clerks of the house of representative and the senate detailing the
103	103	70committee’s recommendations as to divestment from climate risk investments and any plan to
104	104	71limit negative economic impacts or divest from carbon producing industries. The committee’s
105	105	72report shall direct the board’s actions. 5 of 10
106	106	73 (g) The committee shall be subject to sections 18 to 25, inclusive, of chapter 30A and
107	107	74chapter 66. The committee shall maintain a website and shall make available all meeting
108	108	75materials not later than 7 days after a meeting of the committee.
109	109	76 SECTION 2. Section 23 of chapter 32 of the General Laws is hereby amended by
110	110	77inserting after subdivision 8, inserted by section 14 of chapter 358 of the acts of 2020, the
111	111	78following subdivision:-
112	112	79 (9) The PRIM Board shall not approve or ratify any fossil fuel investments. The PRIM
113	113	80Board shall not approve or ratify any climate risk investments as defined in section 23C.
114	114	81 SECTION 3. Said chapter 32, as so appearing, is hereby amended by inserting after
115	115	82section 23B the following section:-
116	116	83 Section 23C. (a) As used in this section the following words shall, unless the context
117	117	84clearly requires otherwise, have the following meanings:-
118	118	85 “Actively managed investment funds”, any investment fund that is managed by a single
119	119	86manager or a management team who makes decisions regarding how to invest money held in the
120	120	87fund.
121	121	88 “Biofuel”, any fuel made from biomass.
122	122	89 “Board”, the pension reserves investment management board established pursuant to
123	123	90section 23 of chapter 32.
124	124	91 “Climate risk investments,” as defined in section 72 of chapter 29. 6 of 10
125	125	92 “Committee”, the climate risk investment review committee established pursuant to
126	126	93section 72 of chapter 29.
127	127	94 “Direct holdings”, all securities of a company held directly by the public fund or in an
128	128	95account or fund in which the public fund owns all shares or interests.
129	129	96 “Fossil fuel investments”, any stocks or other securities of a corporation or company
130	130	97within the fossil fuel industry or any subsidiary, affiliate or parent of any corporation or company
131	131	98among the 200 largest publicly traded fossil fuel companies, as established by carbon in the
132	132	99companies’ proven oil, gas and coal reserves.
133	133	100 “Indirect holdings”, all securities of a company held in an account or fund, such as a
134	134	101mutual fund, managed by 1 or more persons not employed by the public fund, in which the
135	135	102public fund owns shares or interests together with other investors not subject to this section.
136	136	103 “Public fund”, the Pension Reserves Investment Trust or the pension reserves investment
137	137	104management board in charge of managing the pooled investment fund consisting of the assets of
138	138	105the state employees’ and teachers’ retirement systems as well as the assets of local retirement
139	139	106systems under the control of the board.
140	140	107 (b) Notwithstanding any general or special law to the contrary, within 90 days of the
141	141	108effective date of this section, the public fund, in consultation with the committee, shall identify
142	142	109all climate risk investments in which the public fund has direct or indirect holdings. By the first
143	143	110meeting of the public fund following the 90-day period, the public fund shall assemble all
144	144	111climate risk investments in which it has direct or indirect holdings into a climate risk investments
145	145	112list. The public fund shall update the climate risk investments list on a quarterly basis based on
146	146	113evolving information gathered by the public fund and the committee. 7 of 10
147	147	114 (c) Notwithstanding any general or special law to the contrary, the public fund shall:
148	148	115 (1) determine the companies on the climate risk investments list, created pursuant to
149	149	116subsection (b), in which the public fund owns direct or indirect holdings;
150	150	117 (2) not later than January 1, 2026, in accordance with sound investment criteria and
151	151	118consistent with the public fund’s fiduciary obligations, sell, redeem, divest or withdraw all
152	152	119publicly-traded securities of each company identified in clause (1); and
153	153	120 (3) in the time period before the sale, redemption, divestment or withdrawal pursuant to
154	154	121clause (2), the public fund may sign onto engagement letters or participate in shareholder
155	155	122resolutions regarding the scrutinized business operations of companies identified in clause (1) in
156	156	123which the public fund still owns direct or indirect holdings.
157	157	124 (d) The public fund shall not acquire securities of companies on the climate risk
158	158	125investment list created pursuant to clause (1) of subsection (c), except as provided for in
159	159	126subsection (e).
160	160	127 (e) Notwithstanding anything in this section to the contrary, subsections (c) and (d) shall
161	161	128not apply to indirect holdings in actively managed investment funds; provided, however, that the
162	162	129public fund shall submit letters to the managers of such investment funds containing climate risk
163	163	130investments requesting that the managers consider removing such climate risk investments from
164	164	131the investment fund or create a similarly actively managed fund with indirect holdings devoid of
165	165	132such investments. If the manager creates a similar fund devoid of climate risk investments, the
166	166	133public fund shall replace all applicable investments with investments in the similar fund in an
167	167	134expedited timeframe consistent with prudent investing standards. If the manager refuses to create
168	168	135a similar fund devoid of climate risk investments, the public fund shall, in consultation with the 8 of 10
169	169	136committee, develop an alternative plan to decarbonize such investment funds within 30 days of
170	170	137receiving notice from the manager. For the purposes of this section, private equity funds shall be
171	171	138deemed to be actively managed investment funds.
172	172	139 (f) Notwithstanding any general or special law to the contrary, with respect to actions
173	173	140taken in compliance with this section, the public fund shall be exempt from any conflicting
174	174	141statutory or common law obligations, including any such obligations with respect to choice of
175	175	142asset managers, investment funds or investments for the public fund’s securities portfolios and
176	176	143all good faith determinations regarding companies as required by this section.
177	177	144 (g) The public fund shall file a copy of the climate risk investment list with the clerks of
178	178	145the house of representatives and the senate within 30 days after the list is created. Annually
179	179	146thereafter, not later than February 1, the public fund shall file a report with the clerks of the
180	180	147house of representatives and the senate that includes: (1) the most recent scrutinized companies
181	181	148list; (2) all climate risk investments sold, redeemed, divested or withdrawn in compliance with
182	182	149this section; (3) all prohibited climate risk investments from which the public fund has not yet
183	183	150divested pursuant to this section; (4) any progress made pursuant to subsection (e); and (5)
184	184	151documentation that the public fund has complied with subsection (e), including, but not limited
185	185	152to, copies of letters requesting the removal of climate risk investments from actively managed
186	186	153investment funds and documentation as to what actions were taken by the manager of such fund
187	187	154and the public fund subsequent to such requests.
188	188	155 SECTION 4. Notwithstanding any general or special law to the contrary, the pension
189	189	156fund of any state agency or state authority, as defined in section 1 of chapter 29 of the General
190	190	157Laws, not subject to chapter 32 of the General Laws shall annually review, in consultation with 9 of 10
191	191	158the climate risk investment review committee established pursuant to section 72 of said chapter
192	192	15929, all climate risk investments, as defined in section 23C of chapter 32 of the General Laws, and
193	193	160investments in other industries that may have a negative impact on the global climate or conflict
194	194	161or undermine the commonwealth’s climate goals; provided, that when the climate risk
195	195	162investment review committee assesses that certain
196	196	163 investments have a negative impact on the global climate or conflict with the
197	197	164commonwealth’s climate goals, the pension fund of the state agency or state authority shall
198	198	165divest from those investments. The pension fund of the state agency or state authority shall
199	199	166consider the economic impact of investments in industries that may have a negative impact on
200	200	167the global climate and determine whether it is prudent, in accordance with chapter 203C, to
201	201	168continue investment on behalf of the beneficiaries of retirement systems named in this section.
202	202	169 The pension fund of the state agency or state authority shall, in accordance with sound
203	203	170investment criteria and consistent with the fund's fiduciary obligations, take into account that
204	204	171carbon investments have financial risks to pension beneficiaries and take appropriate action
205	205	172pursuant to this section.
206	206	173 SECTION 5. Notwithstanding any general or special law to the contrary, the pension
207	207	174fund of the city, town, district or county that is not subject to chapter 32 of the General Laws nor
208	208	175under the control of the pension reserves investment management board may request and access
209	209	176information and reports relevant to the decision to divest from climate risk investments, as
210	210	177defined in section 23C of said chapter 32, from the climate risk investment review committee.
211	211	178The information and reports may include, but shall not be limited to, annual reports prepared by 10 of 10
212	212	179the climate risk investment review committee pursuant to subsection (f) of section 72 of chapter
213	213	18029 and the climate risk investment list prepared pursuant to subsection (b) of said section 23C.