Open Letter to the Somerville Retirement Board

To: Somerville Retirement Board

On Monday, the Boston Globe reported that the Massachusetts state pension fund has lost over $500 million as a result of its investments in the fossil fuel industry over just the last year, according to a review by Trillium Asset Management. This comes after a report by the same group last month showing that the California state pension system had lost $5 billion by investing in the fossil fuel industry during the last year.

“This is a material loss of money, which directly impacts the strength of the pension fund”, said Matthew Patsky, CEO of Trillium Asset Management. “Fossil fuel stocks are volatile investments. Investors and fiduciaries should take this moment to reassess their financial involvement in carbon pollution, climate disruption and the financial risk fossil fuels plays in their portfolio.”

These reports raise serious questions about how much money the City of Somerville has lost on its own pension investments. As members of the Somerville Retirement System and elected officials representing members of the System, we are concerned about the financial health of the Somerville pension fund.

According to the report’s authors, the state’s losses are due to the fact that the fossil fuel industry has underperformed the market for the last several years. Looking forward, the prospects for a long-term recovery for these stocks are not bright. As easily accessible fossil fuel deposits are exhausted, the cost of fossil fuel extraction continues to rise. At the same time, technological advances are lowering the costs of alternatives, such as solar and wind, which will undercut increasingly expensive fossil fuels. In addition to these structural factors in the energy sector, measures necessary to address global climate change will require dramatic reductions in the use of fossil fuels in the near future, with research showing that around 80% of all known fossil fuel deposits must be left in the ground.

Jeremy Grantham, the major investor famous for being one of the few people in the investment community to predict both the tech bubble and housing bubble, has said that “if all this doesn’t make these investments unprofitable, they will be very lucky”, and several reports from the London School of Economics have suggested that all the unburnable fossil fuels owned by fossil fuel companies represents a large market bubble.

These concerns have now been echoed by many financial experts with reports from rating agency Standard and Poor’s, investment banks HSBC and CITI, and investment firms Aperio Group, IMPAX Asset Management, and MSCI, all recommending divestment from fossil fuel stocks.

In Somerville, the Retirement Board has been charged with the task of considering divestment for the past year and a half, under pressure from the grassroots group Fossil Free Somerville. Action on divestment is already supported by the Mayor and every member of the Board of Alderman.

Beyond Somerville, a global fossil fuel divestment movement has been fueled by these serious financial concerns in addition to moral concern about investing in an industry that constitutes a serious threat to the planet and that spends enormous sums of money lobbying against policies needed to fight climate change and funding climate change denial. Many institutions and cities around the world have already committed to divesting some or all of their funds from fossil fuel stocks including Stanford University, Syracuse University, University of California, the cities of Oakland, CA and Seattle, WA, the state of California, and many others.

In Massachusetts, there is a bill in the state legislature (S1350 & H2269) to divest the state pension fund. Unions representing workers in the pension system, concerned about the financial health of fund their members rely on for a secure retirement, have joined environmental organizations in campaigning for divestment.

Fortunately, Somerville is one of a minority of cities in Massachusetts to control its own pension investments and therefore does not need to wait for this bill to pass in order to divest.

Despite all this, the Somerville pension fund currently maintains millions of dollars invested in fossil fuel companies. We have serious concerns about whether this is consistent with the Somerville Retirement Board’s fiduciary duty to Somerville’s workers and retirees.

We therefore request that the Somerville Retirement Board provide answers to the following questions for members of the pension system and all the residents of Somerville:

How much money has Somerville lost as a result of maintaining investments in the fossil fuel industry over the last year and past three years?

Given the ongoing structural changes in the energy sector and the pressing need to reduce fossil fuel usage in response to global climate change, does the Retirement Board think these stocks are likely to recover their value rather than continue to decline?

Can the Retirement Board re-invest the money currently invested in the fossil fuel industry to better ensure the long-term health of the Somerville pension fund?


Katjana Ballantyne
Ward 7 Alderman

Mathew McLaughlin

Mark Niedergang
Ward 5 Alderman

Peter St. Clair
SRS Retiree

Patricia Wild
SRS Retiree