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A measure that would have required the state of Oregon to sell its holdings in coal, oil, and gas businesses more quickly has been stalled in the legislature.
To meet Oregon’s objective of reducing greenhouse-gas emissions by 90% from 1990 levels by 2050, the state treasurer and the Oregon Investment Council would have been required to take action by 2035 under House Bill 2601.
Despite the best efforts of the bill’s primary sponsor and other interested parties to reach a consensus, a House committee failed to take action on the measure before the April 4 deadline.
Legislators are pushing less contentious initiatives to encourage voluntary carbon-capture projects on forests and farming (Senate Bill 530) and demand energy-efficiency measures in the construction of all sorts, even though the divestment legislation has received greater attention (SB 868-SB 871).
Now holding $95.9 billion as of February, Oregon’s Public Employees Retirement System is the 17th most extensive pension system in the United States and the 15th largest in the public sector. Investment profits from the fund and contributions from government employers and employees finance PERS payments to retirees.
Differing Opinions
A conflict emerged between Read, one of five members of the Oregon Investment Council, and lawmakers and environmental organizations who pushed for a speedier schedule for state disengagement from fossil-fuel corporations.
The governor appoints four others to the council to help with investment policymaking. Democratic Southeast Portland Representative and Bill 2601 primary sponsor Khanh Pham made the following statement, according to reports:
“Our state treasurer acknowledges that climate change poses serious risks, not just to our planet and communities, but also to our financial investments. Both the treasurer and bill sponsors agree that eventually ending investments in fossil fuels is the responsible path to ensure the future financial performance of PERS.”
“The question isn’t if we need to divest from fossil fuels which we all agree on. The question is really how and when fossil fuel investments are phased out. … Our communities don’t have until 2050 to wait.”
Read, who served as a state representative for ten years, echoed the sentiments of practically every state treasurer, Democrat or Republican, since Oregon started making large-scale investments in the early 1970s.
Read published the following letter at the start of the House committee hearing on February 16: “Legislation that imposes blanket or even targeted restrictions on how or where Treasury can invest will affect these numbers and would mean that funding retirement incomes is no longer the sole purpose of Oregon Public Employees Retirement Fund.
“Claims that are limiting Oregon’s investment choices through statute will automatically or easily be revenue-neutral or yield higher returns are false. Instead, these restrictions will almost certainly lead to reduced investment returns and the benefits OPERF payments afford communities across our state.”
Read’s second term will end in less than two years. Legally, he cannot run for reelection in 2024 for a third straight term. Two divestment bills have just passed the Oregon legislature. When a similar measure was rejected by Governor Vic Atiyeh in 1985, parliament mandated that the state sell its holdings in enterprises doing business with South Africa in 1987 while a white minority still ruled the country.
Long talks led to a shift to a Black majority administration in 1994 when Nelson Mandela was elected president. Nevertheless, this divestment was not yet complete at that time. In 2005, when Sudan was accused of crimes in its struggle against rebels in Darfur, lawmakers approved a bill with identical language.
Enemies of the Allies
Representative John Baessler of the American Federation of State, County and Municipal Employees/Oregon (AFSCME/Oregon), the state’s second-largest employee union, echoed Read’s sentiments.
We agree with the motivation behind this law and support efforts to wean the state off of fossil fuels. But we also worry about the bill’s effect on our investment portfolio.…. The treasurer’s plan to phase out investments carefully to preserve their advantages is preferable.
“Legislation which can be a blunt instrument is not the best way to accomplish the goals of divesting from fossil fuels and protecting the earned retirement funds of public employees that the state is currently investing for them.”
Senate Republican Leader Tim Knopp of Bend backed Baessler. In 2003 as House majority leader, chaired the House committee that overhauled the public pension system to rely more on investment returns and employee payments.
On February 16, Knopp stated: “Oregon courts have affirmed over the past 30 years that the Public Employee Retirement Fund money belongs to public employees, not to the state or state lawmakers.
We cannot and should not do anything to usurp their decision-making authority about how their money is invested, and that would lead to a decline in their earnings or their retirement future.”
Yet, the measure had the backing of the Oregon Education Association and the American Federation of Teachers-Oregon. Some university endowments and OOregon’spublic institutions have eliminated their holdings in fossil fuels, but only one state has done so (Maine).
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What Supporters Say?
Private equity returns in Oregon were a topic of discussion. These returns make up a significant portion of the state’s investments but are less subject to public scrutiny.
Susan Palmiter, speaking on behalf of Divest Oregon, noted that Oregon PERS had a 26.4% allocation to private equities, far higher than any other fund on the 2021 list, but that the fund’s 10-year return on investment was only 8.8%, lower than the average of 8.9% for all pension funds and 9.2% for the 15 most significant funds.
“We need this legislation because one of the preferred strategies that the treasurer stated two weeks ago to this committee does not work,” Palmiter said.
“He suggested the treasury would continue to engage with fossil-fuel companies through ‘shareholder engagement’ to deal with the climate risk to the portfolio. There is much evidence that this approach does not protect portfolios or the climate.”
Democrat and primary Senate sponsor Jeff Golden of Ashland said Read presented a false option since fossil fuel corporations stand to lose money as demand rises for carbon-free electricity to fulfill reduction objectives in heat-trapping greenhouse emissions.
“It is a false framing of this issue that we are forced to pick between the best return on investment or aligning our investment with our policy positions. We believe it can be done without fossil-fuel stocks,” he said.
“On the one hand, we are making this energy transition as fast as possible. On the other hand, we are financing the growth (in fossil fuels) that makes it harder to do.” A visitor from Mars would have difficulty making sense of things on Earth.
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