SECTION 1. As used in this act the following words shall, unless the context clearly requires otherwise, have the following meanings:—

“Board”, the pension reserves investment management board established in section 23 of chapter 32 of the General Laws.

“Company”, a sole proprietorship, organization, association, corporation, partnership, joint venture, limited partnership, limited liability partnership, limited liability company or other entity or business association, including all wholly-owned subsidiaries, majority-owned subsidiaries, parent companies or affiliates of such entities or business associations that exist for profit-making purposes.

“Direct holdings”, all securities of a company held directly by the public fund or in an account or fund in which the public fund owns all shares or interests.

“Fossil fuel company”, a company identified by a Global Industry Classification System code in one of the following sectors: (1) coal and consumable fuels; (2) integrated oil and gas; (3) oil and gas exploration and production.

“Indirect holdings”, all securities of a company held in an account or fund, such as a mutual fund, managed by 1 or more persons not employed by the public fund, in which the public fund owns shares or interests together with other investors not subject to this act.

“Public fund”, the Pension Reserves Investment Trust or the Pension Reserves Investment Management Board charged with managing the pooled investment fund consisting of the assets of the State Employees’ and Teachers’ Retirement Systems as well as the assets of local retirement systems under the control of the board.

"Thermal coal", coal used to generate electricity, such as that which is burned to create steam to run turbines. Thermal coal does not mean metallurgical coal or coking coal used to produce steel.

"Thermal coal company" means a publicly traded company that generates 50 percent or more of its revenue from the mining of thermal coal, as determined by the board.

SECTION 2. Notwithstanding any general or special law to the contrary, within 30 days of the effective date of this act, the public fund shall facilitate the identification of all thermal coal and fossil fuel companies in which the fund owns direct or indirect holdings.

SECTION 3. Notwithstanding any general or special law to the contrary, the public fund shall take the following actions in relation to thermal coal companies in which the fund owns direct or indirect holdings.

(a) The public fund shall sell, redeem, divest or withdraw all publicly-traded securities of each thermal coal company identified in section 2 before December 31, 2017;

(b) If so recommended by the commission created in section 4, the public fund shall sell, redeem, divest or withdraw all publicly traded securities of each fossil fuel company identified in section 2 according to the following schedule: (i) at least 33 per cent of such assets shall be removed from the public fund’s assets under management before December 31, 2018; (ii) 67 per cent of such assets shall be removed from the public fund’s assets under management before December 31, 2019; (iii) 100 per cent of such assets shall be removed from the public fund’s assets under management before December 31, 2020.

(b) At no time shall the public fund acquire new assets or securities of thermal coal companies or, if so recommended by the commission created in section 4, fossil fuel companies.

SECTION 4. Notwithstanding any general or special law to the contrary, there shall be a special commission to investigate and study divestment of the public fund from fossil fuel companies as defined herein, but not including thermal coal companies. according to the schedule in section 3 (b) of this act.

(a) The commission shall evaluate divestment from fossil fuels, not including thermal coal, weighed against any potential increased risk that divestment may pose to the Commonwealth’s pension funds and retirees.

(b) The commission shall consist of 7 members: 1 of whom shall be the Treasurer, who shall chair the commission; 1 of whom shall be the executive director of the public employee retirement administration commission, or the director’s designee; 1 of whom shall be a member of the Retired State, County and Municipal Employees Association of Massachusetts; 1 of whom shall be an active member of the Service Employees International Union, designated by the State Council; 3 of whom shall be private citizens, appointed by the Treasurer, based on the citizens’ expertise and current employment in Environment, Social and Governance related finance, institutional divestment, or climate science.

(c) The commission shall consult with experts in the relevant fields of economics, wealth management, fiduciary law, and environmental sciences, and file a report of its recommendations. The report shall include, but not be limited to: (i) recommendations on how to define fossil fuel companies; (ii) a basic sensitivity analysis of the potential impact of divestment on the fund’s return on investment, including an analysis of the potential impact that divestment from fossil fuel companies may have on the amortization schedules for the Commonwealth’s pension funds; (iii) an analysis and recommendations as to how best incorporate assessment of carbon risk into the Investment Policy Statement; (iv) an analysis of the potential environmental and policy benefits derived from divestment from fossil fuel companies; (v) recommendations on divestment of indirect holdings, particularly regarding potential exceptions for mutual funds and index funds that may invest in fossil fuel companies; (vi) analysis on the potential impact that divestment may pose to companies and employees based in the Commonwealth; (vii) recommendations on effective administration and oversight of fossil fuel divestment.

(d) The commission shall file a report of its recommendations, together with the actuarial analysis, if any, with the clerks of the house and senate and the chairs of the house and senate committee on ways and means not later than April 1, 2017. Upon the filing of the report of the commission, the public fund shall immediately take action to fulfill all affirmative recommendations, if any, with regard to the divestment of identified fossil fuel companies.

SECTION 5. Notwithstanding anything in this act to the contrary, any requirement to divest the public fund from thermal coal or other fossil fuel companies shall not apply to indirect holdings in actively managed investment funds; provided, however, that the public fund shall submit letters to the managers of such investment funds containing thermal coal or other fossil fuel companies requesting that they consider removing remove such companies from the investment fund or create a similar actively managed fund with indirect holdings devoid of such companies. If the manager creates a similar fund, the public fund shall replace all applicable investments with investments in the similar fund in an expedited timeframe consistent with prudent investing standards. For the purposes of this section, private equity funds shall be deemed to be actively managed investment funds.

SECTION 6. Notwithstanding any general or special law to the contrary, with respect to actions taken in compliance with this act, the public fund shall be exempt from any conflicting statutory or common law obligations, including any such obligations with respect to choice of asset managers, investment funds or investments for the public fund’s securities portfolios and all good faith determinations regarding thermal coal and fossil fuel companies as required by this act.

SECTION 7. Notwithstanding any general or special law to the contrary, the public fund shall be permitted to cease divesting from companies under subsection (a) of section 3, reinvest in companies from which it divested under said subsection (a) of said section 3 or continue to invest in companies from which it has not yet divested upon clear and convincing evidence showing that the total and aggregate value of all assets under management by, or on behalf of, the public fund becomes: (i) equal to or less than 99.5 per cent; or (ii) 100 per cent less 50 basis points of the net value of all assets under management by, or on behalf of, the public fund in the previous year as a direct result of divestment. Cessation of divestment, reinvestment or any subsequent ongoing investment authorized by this section shall be strictly limited to the minimum steps necessary to avoid the contingency set forth in the preceding sentence.

This provision shall also apply to any divestment of the public fund from fossil fuel companies.

For any cessation of divestment, and in advance of such cessation, authorized by this subsection, the public fund shall provide a written report to the attorney general, the senate and house committees on ways and means and the joint committee on public service, updated semi-annually thereafter as applicable, setting forth the reasons and justification, supported by clear and convincing evidence, for its decisions to cease divestment, to reinvest or to remain invested in thermal coal. This provision shall also apply to any divestment of the public fund from fossil fuel companies.

SECTION 8. Present, future, and former board members of the Public Fund, jointly and individually, state officers and employees, and investment managers under contract with the Public Fund shall be indemnified from the General Fund and held harmless by Commonwealth from all claims, demands, suits, actions, damages, judgments, costs, charges and expenses, including court costs and attorney’s fees, and against all liability, losses, and damages of any nature whatsoever that these present, future, or former board members, officers, employees, or contract investment managers shall or may at any time sustain by reason of any decision to restrict, reduce, or eliminate investments in fossil fuel companies.

SECTION 9. The public fund shall file a copy of the lists of thermal coal in which the fund owns direct or indirect interests with the clerks of the senate and the house of representatives and the attorney general within 30 days after the lists are created. Annually thereafter, the public fund shall file a report with the clerks of the senate and the house of representatives and the attorney general that includes: (1) all investments sold, redeemed, divested or withdrawn in compliance with subsection (a) of section 3 and (2) all prohibited investments from which the public fund has not yet divested under subsection (a) of said section 3. This provision shall also apply to any divestment of the public fund from fossil fuel companies.