Democratic lawmakers and environmentalists are calling on the Oregon Treasury to pause new pension investments into private assets and private equity funds invested in fossil fuel companies and projects.
The “Pause Act” would put a five-year moratorium on new private equity investments made with Public Employee Retirement System, or PERS, funds, if more than 10% of the private equity fund is invested in fossil fuel companies or heavy users. It’s meant to move the state’s $100 billion PERS investments away from risky fossil fuel investments that are linked to global climate change, according to chief sponsors Sen. Jeff Golden, D-Ashland, and Sen. Khanh Pham, D-Portland.
Golden and Pham have both backed recent legislation to move the Treasury away from fossil fuel investments, including the COAL ACT passed in 2023, which directs the Treasury to divest its holdings in publicly traded companies that derive 20% or more of their revenue from coal production.
“This is the right time to stop throwing good money after bad investments and give our dedicated Treasury staff the latitude to better align investment practices with emerging research on the risks to these funds,” Golden said in a news release.
The act, Senate Bill 681, would help the Treasury achieve goals outlined in its Net-Zero Plan, which aims to reduce PERS investments in companies that emit harmful substances by 60% by 2035. The plan, backed by former Treasurer Tobias Read aimed to get the portfolio to net-zero emissions by 2050, which means striking a balance between investments in heavy carbon-emitting industries with industries that are cutting or absorbing emissions or are committing to doing so.
Treasury committed to net-zero
Spokespersons for the new state treasurer, Elizabeth Steiner, said her staff is working with Golden, Pham and advocates from the nonprofit Divest Oregon — a coalition of groups that have advocated the Treasury move away from investing in fossil fuels for years — to incorporate the goals of the Pause Act into a larger Treasury bill that would codify the Net-Zero Plan into law.
“Treasurer Steiner is fully committed to accomplishing Oregon’s goal to reach net-zero in the emissions of PERS investments by 2050 and safeguarding Oregon retirees from the risks that climate change poses to the value of the public employee retirement fund,” Robb Cowie, an agency spokesperson, said in an email.
Steiner hasn’t taken a position on the Senate Bill 681 yet, Cowie said, but is concerned that divesting quickly from some private equity funds could increase PERS’ unfunded liability, which is today about $29.4 billion.
“We’ve been having thoughtful and open discussions with legislators, labor leaders and others on how we reach the net-zero goal,” Cowie said.
Advocates of the bill from Divest Oregon say it would not only help combat climate change, but also would help the Treasury inch back from an abnormally high and risky proportion of its assets tied into private equity investments.
About 28% of the funds in PERS, which serves more than 166,000 current retirees, are invested in private equity funds, which are pooled investments in non-publicly traded companies. That is more than double the average of other state pension systems, according to Public Plans Data, a nonprofit research consortium housed at the Center for Retirement Research at Boston College. This exposes the PERS system to major risks, according to divest and pension watchdog groups like the Chicago-based Private Equity Stakeholder Project.
Another 10% of PERS funds are wrapped up in real assets, such as investments in infrastructure, commodities and natural resources. Private equity and real assets represent the single largest portion of emission-related investments in the PERS portfolio, including investments in fracked gas and oil. Because private equity investments aren’t subject to the same transparency rules that publicly traded companies and investments are, it’s not always clear where money is going.
“Private investments are extractive, secretive and risky,” Jennifer Schramm, co-lead at Divest Oregon, said in a statement. “The Pause Act gives Treasury staff the time to address the enormous risk to the climate and to the portfolio of private investments in fossil fuels and to consider more labor-aligned, business-friendly, climate-safe investments.”
— Alex Baumhardt, Oregon Capital Chronicle
Oregon Capital Chronicle is part of States Newsroom, the nation’s largest state-focused nonprofit news organization.