(Bloomberg) --

Last month, Maine became the first U.S. state to order its public pension fund to sell off fossil-fuel holdings. The deadline? Four and a half years.

And if that isn’t anticlimactic enough, there’s more.

The Maine Public Employees Retirement System can’t simply jettison investments in atmosphere-warming items such as coal, petroleum and natural gas. Since the fund’s “primary duty” is to the monetary wellbeing of retirees and members, it’s barred from selling any securities unless it’s in their “best financial interest,” explained MainePERS Executive Director Sandy Matheson. All decisions must be based by law on “sound investment criteria” and be “consistent with the board’s fiduciary obligations.”

The New England state’s position on fossil fuels is the polar opposite of oil- producing states such as Texas, where last month Republican Governor Greg Abbott signed a law banning state investments in businesses that cut their ties to the fossil fuels industry.

MainePERS has about $1.3 billion of its $17.6 billion in assets invested in fossil fuels via privately run funds and passively managed index funds that mimic the Russell 3000. The state pension system is a limited partner in the private market funds it owns, meaning it has no role in how they are invested, Matheson said.

The investments are structured so that capital is returned to MainePERS when individual stakes within the funds are liquidated, usually over a seven- to 10-year period. The privately managed funds typically generate returns that are two to three percentage points more than those achieved in the public markets, she said.

If MainePERS were to sell its stakes in these private investments on the secondary market, it would likely only be able to do so at a loss, Matheson said. That’s because sales of limited partnership interests almost always take place at a discount. But there’s a bigger point about the downsides of quick divestment, she added.

“Just selling does nothing to address climate change, as ownership of the funds are just being transferred to someone else,” Matheson said. “That’s true, both in the private and public markets.”

Staying in the game is a more effective long game, she said. By investing in the Russell 3000, MainePERS is a shareholder in the largest companies, which means it can work with other investors to influence corporate behavior. For example, the Maine pension fund backed the recent efforts led by Engine No. 1 to overhaul the board of Exxon Mobil Corp.

“We couldn’t have done that if we weren’t a shareholder,” she said.

“Selling fossil fuel stocks doesn’t change the demand or use of fossil fuels in the same way that selling Apple doesn’t change the use or increase in sales of iPhones,” Matheson said.

As stock owners, MainePERS can use its voice to “advocate for corporate transparency and responsibility on climate and other issues, to help make companies stronger and more profitable over the long term,” she said. “You couldn’t do that if you divested.”

Besides, oil and gas companies and other corporate polluters are already being forced by the market to cut greenhouse gas emissions and transition to cleaner energy, Matheson said. “The most exciting investment opportunities in energy are in renewables and green technologies, and that means the fund may naturally move away from fossil fuels,” she said.

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