On June 16th, Governor of Maine (US) Janet Mills signed the fossil fuel divestment bill LD99 into law. This makes the state of Maine, located in the extreme northeast of the US, the first jurisdiction in North America to advance divestment from all fossil fuels via legislation. Even if the bill directs the $17 billion Maine Public Employees Retirement System (MainePERS) and other state funds to divest from fossil fuels within 5 years, many unknowns remain about the scope of this law and its actual implementation by MainePERS. <\/span><\/strong><\/p>\n<\/div><\/div><\/div> The Maine State Legislature passed LD 99, \u201cAn Act To Require the State To Divest Itself of Assets Invested in the Fossil Fuel<\/a><\/u>\u201d, which directs the Treasurer of State, and therefore MainePERS, not to invest<\/b> in any prime commercial paper or corporate bonds issued by a fossil fuel company<\/b>. The Treasurer of State shall, in accordance with sound investment criteria and consistent with fiduciary obligations, divest any such holdings and may not invest any assets in any such stocks, securities or other obligations. Divestment [\u2026] must be complete by January 1, 2026<\/b>.<\/p>\n As defined by the legislature:<\/p>\n 2. Our analysis: a strong ambition but many unknowns<\/strong> The adoption of this law by the State of Maine is a major first in the United States<\/b>. In 2015, California lawmakers passed a bill<\/a><\/u> requiring the state\u2019s two largest pension plans to divest their holdings in thermal coal, but this requirement was only for coal mining. Today, the State of Maine goes much further, excluding all thermal coal (mines, coal-fired power plants and infrastructure), but also oil and gas. For MainePERS, which currently has more than $1.3 billion invested in fossil fuel companies<\/a><\/u> including dozens of publicly traded companies like ExxonMobil, Chevron, and ConocoPhillips<\/a><\/u> including $850 million invested through secretive private equity investment funds, the impact of this decision is significant<\/strong>. Until now, the pension fund had no exclusion policy for fossil fuels.<\/p>\n This major advance, hailed by many NGOs<\/a><\/u>, could inspire many legislators around the world. Nevertheless, some unknowns remain and make it uncertain whether Maine PERS will be completely fossil fuel free by 2026.<\/p>\n The main unknown is the attitude of MainePERS<\/strong>. To date, the pension fund has not yet translated this legislation into an investment policy. In her testimony at the Maine Senate<\/a><\/u>, Sandy Matheson, the fund’s executive director, was quite opposed to the legislation LD99. One of the main arguments used is the fiduciary duty<\/strong>, which obliges the pension fund to act in the best interests of its clients, which she said would not be compatible with divestment from fossil fuels. However, two major investment advisors provided recently a fiduciary path through the energy transition<\/a><\/u>: BlackRock and Meketa show that divestment from fossil fuels improves, not weakens, investment returns<\/strong>. A forward-looking analysis shows that fossil fuel companies are exposed to significant regulatory, technological and market risks. Thus, fiduciary duty is not in contradiction with an exit from fossil fuels, in the best interest of the client in the long term.<\/strong><\/p>\n In this context, MainePERS may be tempted to take advantage of some of the law’s flexibilities to minimize the impact of divestment<\/b>.<\/p>\n Finally, another potential flaw in the law is that it does not consider companies that are developing new fossil fuel projects<\/strong>. Thus, MainePERS still has the opportunity to invest in a company that is not currently in the top 200 – calculated on existing fossil fuel reserves – but that plans to develop a new oil or gas production site. Stopping the expansion of the fossil fuel sector must be the priority, as the IEA recently pointed out<\/a><\/u>. MainePERS must therefore commit to exclude any company planning to develop a new coal, oil or gas project.<\/p>\n1. What\u2019s new<\/strong><\/h1><\/span>
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