The Massachusetts Pension Reserves Investment Management (PRIM) Board, which oversees the state’s $104.1 billion pension fund, voted unanimously in favor to approve new proxy voting guidelines proposed by State Treasurer Deborah Goldberg. These guidelines are designed to allow the state pension fund to vote against directors at companies that are not aligned with the Paris Climate Agreement and Climate Action 100+.
The action comes as part of Treasurer Goldberg and PRIM’s commitment to build and implement a comprehensive ESG framework with the proxy goals of limiting global warming to 1.5 degrees Celsius and/or establishing a plan to achieve “net zero” emissions by 2050.
“This vote not only benefits our retirees and taxpayers with its positive environmental outcomes, but has significant potential to increase our bottom line.” said State Treasurer Deborah B. Goldberg, who Chairs the PRIM Board. “It is a more active approach toward achieving our financial goals while having a productive long-term impact on our changing climate.”
Over the past 10 years, PRIM has achieved an investment gain of $70.6 billion – exceeding the benchmark return by $12 billion over that time. In 2020, PRIM became the first founding member of the MIT Sloan School of Management’s Aggregate Confusion Project, a research consortium with the goal of improving ESG measurement.
“Today’s votes help keep PRIM out in front of major ESG trends in the industry,” said Michael G. Trotsky, CFA, Executive Director and Chief Investment Officer of MassPRIM. “The new committee will build on the work we have been doing with our partners in the MIT Sloan School’s Aggregate Confusion Project to become more impactful; to use the power of PRIM to advocate for important change.”
Grassroots organizations, pension funds, and other investors have been working collaboratively with the Treasurer’s office to develop policies where shareholders vote against company directors that are the most significant drivers of climate change. Additionally, the development of an investment approach that pursues an environmental, social, and corporate governance (ESG) frameworks into investment decision making will not only have better impacts on our world but better corporate outcomes resulting in greater returns.
The Board also voted to create an ESG Committee comprised of industry experts. This first-in-the-nation initiative will help to leverage the Fund to be a force that promotes worker safety, fosters diversity, fights against climate change, while still maintaining – and even increasing – returns.
“These voting guidelines are a great move for Massachusetts and other state treasurers and comptrollers should follow suit,” said Mary Cerulli, Founder of Boston based Climate Finance Action. “We know that Treasurer Goldberg’s ESG committee will address the entire portfolio and she will work successfully with other large investors to improve and align the climate transition plans of high-emitting companies.”
“We applaud the leadership of Treasurer Goldberg and today’s actions by the PRIM Board,” said Mindy Lubber, CEO and President of Ceres. “Companies and their directors have been put on notice by many of their shareholders that if they fail to address climate change risks and implement climate practices and policies that will help bring about a transition to a net zero emissions economy, those shareholders will hold them accountable. Following the historic 2021 U.S. proxy season, directors now know they might be replaced if they are not doing their jobs in mitigating climate-related risks and capturing opportunities in the net zero transition.”
The proxy voting guidelines do not restrict or determine which companies the pension fund invests in. Instead, they allow the fund to use its power as a shareholder to advocate for policies that advance effective corporate governance and ensure sustained value for the fund, fostering long-term growth for its investments.
In prior years, the Treasurer proposed, and the PRIM Board unanimously approved a series of reforms, which, in addition to targeting climate change, also focused on renewable energy, human rights standards, executive pay, LGBTQ rights, board diversity and wage equality, and limiting the number of boards a director may sit on.