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A group of environmental activists rally outside the State House on Feb. 26, 2014 in support of a bill to divest Massachusetts' pension fund from fossil fuel companies.

(SHIRA SCHOENBERG / THE REPUBLICAN)

RELATED: The history of divestment in Massachusetts »

BOSTON — In 1997, then-state Sen. Warren Tolman co-sponsored a bill to divest the state’s pension fund from tobacco companies. It was a way to stigmatize the companies and force them to stop marketing to young people.

Years earlier, Tolman had supported divesting the state’s holdings from companies doing business in South Africa, part of a campaign to end apartheid.

“I think you look at (a divestment campaign) and say can you have an impact?” said Tolman, a Democratic candidate for attorney general. “A, is it feasible? B, is it going to have an impact? And C, can we change behavior?”

State lawmakers are currently considering a Senate bill, S. 1225, that would require Massachusetts to divest its pension fund from fossil fuel companies because of concerns about the impact of fossil fuel on climate change.

The bill, sponsored by state Sen. Benjamin Downing, a Pittsfield Democrat, is pending in the Joint Committee on Public Service, which has until June 30 to report it out. Environmental activists, led by the group 350 Massachusetts, have been pushing vocally for its passage. Although some cities and towns have passed fossil fuel divestment, Massachusetts would be the first state to do so.

As legislators consider the bill, they have five case histories to look at, when Massachusetts divested its pension fund from assets for social or moral policy reasons. Previously, Massachusetts divested from Iran (2010), Sudan (2007), tobacco (1997), Northern Ireland (1983) and South Africa (1982).

There are differences between the cases. But there are also similarities. The same arguments, for example about a fiduciary duty to shareholders and about whether divestment is more effective than shareholder engagement, have been made before. Prior cases can provide some lessons to lawmakers about what to look for in the current bill.

Downing welcomes the comparison. “I think the proposal that I filed, that’s continued to gain support, is one that’s in line with past divestment campaigns,” he said. “Whether it’s South Africa, Northern Ireland or Sudan or tobacco in particular… Massachusetts has consistently taken a stand that our pension fund, when an issue rises to a certain level, needs to align with our values.”

State Sen. Benjamin Downing

Some differences between the campaigns are obvious. Notably, four of five past laws dealt with foreign policy.

In some ways, that made the bills easier to pass, because they often had strong domestic support and national coalitions, and little political cost. In the cases of Sudan and Iran, Congress passed legislation explicitly permitting states to divest. The South Africa campaign was also national, and the U.S. would later pass sanctions against the South African government. “Apartheid was a terrible thing, and virtually the entire world with the exception of (United Kingdom Prime Minister) Margaret Thatcher thought economic sanctions should be imposed,” said former Democratic Massachusetts Gov. Michael Dukakis, who supported that divestment.

These divestment bills often had the support of strong interest groups within the state. The Catholic Church and state labor unions lobbied for South African divestment. The Jewish community pushed for divestment against Iran.

State treasurer and now-Democratic gubernatorial candidate Steven Grossman pushed for the Iran sanctions as a candidate for treasurer. Grossman, a former chairman of the pro-Israel lobbying group AIPAC, said Massachusetts was considering the sanctions at the same time as other states and Congress.

“I felt and many other people felt that Iran was and continues to be a threat to the national security of the United States (by) developing a nuclear weapons capability, using hard currency generated from the oil and gas business,” Grossman said. “Therefore, owning stocks of companies that, because of their involvement in a significant way in Iran’s oil and gas business, were going to promote Iran’s headlong pursuit of a nuclear weapons capability, can threaten American national security interests.”

Former U.S. Rep. Barney Frank, a Massachusetts Democrat who introduced divestment bills on Iran and Sudan in the U.S. House and was involved in the South Africa campaign in Massachusetts, said the foreign campaigns were different from the fossil fuel campaign, because they were about human rights. “Changing out of fossil fuels is important, but it doesn’t have the same moral problem,” Frank said. “Sudan, South Africa and Iran, we were making moral cases. There were immoral regimes that were abusing people. Objecting to blatant violations of human rights is different than pushing for public policy change, even if a very worthy one.”

However, those campaigns also raised a concern that is absent from the current debate – the legitimacy of states dabbling in foreign policy. When the Massachusetts Legislature passed a law in 1996 restricting state entities from buying goods from companies doing business with Burma, the National Foreign Trade Council sued Massachusetts. The U.S. Supreme Court ruled that Massachusetts could not preempt Congress by attempting to affect foreign policy.

The most comparable prior case is tobacco divestment, a law that took seven years to pass, over the objections of tobacco lobbyists. Dukakis called for Massachusetts to divest from tobacco in 1990 due to the health dangers of smoking. The bill passed in 1997. Ultimately, seven states would pass tobacco divestment – far fewer than divested from Iran or Sudan.

“The rationale was that…if enough pension funds stepped forward and said we’re divesting, it would get other investors to say this is a stock that may be on the way down, so let me get out of this, and consequently, it could hit tobacco companies where it hurt, on the bottom line and their stock prices,” said Joseph D. Malone, a Republican who was then state treasurer.

Malone said the momentum behind tobacco divestment was greater than the momentum behind the young fossil fuel divestment movement. Tobacco divestment was happening simultaneously with congressional hearings and the passage of tobacco-related regulations. “The more knowledge that was surfacing about the harm inflicted by cigarettes, the strategies being used by tobacco companies and the indifference of tobacco companies - they had the attitude of ‘we’re too big and too powerful no one can touch us’ - that led to the many steps being taken, including the steps by the pension fund,” Malone said.

Dukakis said that campaign was more clear-cut, without the nuances of the fossil fuel debate, which brings up questions about the use of nuclear power and natural gas. “Tobacco was easy, it’s a public health hazard. Everybody knew that. There was a lot of support for getting tough on smoking,” Dukakis said. “And the tobacco industry doesn’t play near the kind of role the fossil fuel industry plays in the national economy.”

As is the case today, opponents of previous divestment campaigns argued that non-financial considerations should not be considered when investing the state pension fund. Supporters argued that the targeted stocks were not fiscally sound investments.

The state has more money invested in fossil fuel companies than in other recent campaigns. According to Downing, fossil fuel companies account for $1.4 billion in investments, or 2.6 percent of the pension fund, which would be divested over a five-year period. (There is still uncertainty over exactly which companies would be targeted by the bill.) Companies doing business with Iran and Sudan each represented less than 0.2 percent of the fund’s assets; tobacco companies represented just under 1 percent.

Jon Carlisle, a spokesman for Grossman’s office, said the state has not tracked the financial impact of divestment. The divestment laws targeting Sudan and Iran had an escape clause, also included in the fossil fuel bill, saying if divestment causes earnings to drop by a certain amount (in the case of fossil fuel divestment, half a percent), the fund can reinvest. Downing said that clause has never been triggered.

One argument for being the first state to divest is Massachusetts would be taking a strong moral stand that the state should lessen its reliance on fossil fuels.

Downing pointed out that the state is already investing ratepayer money in programs to move away from oil and gas and toward renewable energy and conservation. “If on one hand with ratepayer dollars, we’re investing in that transition, on the other hand we shouldn’t be relying on those profits to meet our obligations to pensioners and retirees,” Downing said.

But for Massachusetts to have an impact, it would need to be joined by other states. “If not many people are doing it, it doesn’t have much impact,” Frank said. “These kinds of economic pressures don’t work in getting changes unless they reach a certain critical mass.”

Cheryl Smith, managing partner of Trillium Asset Management in Boston, an investment firm committed to socially responsible investment, said one difference between the fossil fuel campaign and earlier ones is the magnitude of what activists are asking companies to do. Asking companies to withdraw money from South Africa or Sudan – which generally comprised a tiny portion of their assets – would not be a big deal for most investors. Companies could replace those investments with other foreign assets. “But asking a major oil company not to be an oil company is a different scale of ask,” Smith said. “I’m very pessimistic you’re going to get companies to change what they do, because you’re asking them to stop existing or completely change why they exist.”

However, Smith said divestment campaigns can have benefits outside of divestment itself, by increasing pressure for political change and creating public awareness. “I would say any probability of success for this particular fossil fuel divestment movement will come ultimately through a political change and political action by stirring up awareness, and not because it directly leads companies to change what they do,” Smith said.

Lauren Compere, managing director at Boston Common Asset, a socially responsible investment firm, said her company uses multiple strategies to address climate change – not investing in certain energy companies, such as those focused on oil sands production, while investing in companies that support energy efficient technology and the development and solar and wind energy. But she would not, for example, refuse to invest in natural gas.

Compere thinks the divestment campaign is valuable as much for public relations and political purposes as for economic impact. “I think (the divestment bill) has allowed the discussion and debate publicly to be ramped up and elevated to a level that might not have otherwise happened,” Compere said. “I think it needs to be combined with other strategies to be effective.”

In prior campaigns, divestment was part of a larger national strategy, whether aimed at ending genocide in Sudan or warning the public about tobacco.

Supporters of fossil fuel divestment say they see divestment similarly. “Divestment isn’t the end goal,” Downing said. “I’d be just as happy if we had a significant national debate about climate change that ended in a federal policy that put us on the pathway to reducing our dependency on fossil fuels and transitioning to policy based on clean energy, energy efficiency and conservation.”