A fracking site in Greeley, Colorado, is pictured on June 24, 2020. About 10% of Oregon’s Public Employees Retirement System fund is invested in so-called real assets, such as investments in infrastructure, commodities and natural resources including fracked gas and oil. The single largest portion of emission-related investments in the state’s pension portfolio are held in real assets. (Andy Bosselman/Colorado Newsline)

House Bill 2081 codifies into law Treasury’s Net-Zero plan, which would effectively make PERS carbon neutral by 2050

Oregon would guarantee the state’s $101 billion public pension fund is fully carbon neutral within the next 25 years under a bill one step from becoming law.

House Bill 2081, a bill to codify Oregon State Treasury’s 2023 “Net-Zero” plan into law, passed the Oregon Senate on Monday in an 18-10 vote with Sen. Dick Anderson, R-Lincoln City, joining Democrats to vote for it. Provided Gov. Tina Kotek signs it or allows it to become law without her signature, the act would ensure future treasurers can’t back down from the plan followed by Democratic Treasurer Elizabeth Steiner and her predecessor, Democrat Tobias Read.

The plan requires the Treasury to reduce its overall PERS, or Public Employees Retirement System, investments that emit harmful substances by 60% by 2035 and to get the portfolio to “net-zero” emissions by 2050. This does not mean fully divesting the fund of its fossil fuel holdings but striking a balance between investments in heavy carbon-emitting industries with industries that are cutting or absorbing emissions or are committing to doing so by 2035.

House Bill 2081 made it through the Oregon House on May 1 in a 36-18 vote with the support of two Republicans — state Reps. Cyrus Javadi, R-Tillamook, and Greg Smith, R-Heppner.

Steiner in a statement made clear that the bill is “a clean energy investment law, not a divestment mandate.”

“Global markets are making the transition to cleaner sources of energy that reduce greenhouse gas emissions, provide cleaner air and water, and protect our communities,” she said. “The Climate Resilience Investment Act protects employee retirement funds by enabling Treasury’s investments to take full advantage of the opportunities the clean energy transition creates.”

Nearly 60% of the PERS portfolio, which currently serves more than 166,000 retirees, are invested in private markets, including in private equity and “real assets,” such as investments in infrastructure, commodities and natural resources, including fracked gas and oil. This is where the single largest portion of emission-related investments in the state’s pension portfolio are held.

About 28% is invested in private equity funds, which are pooled investments in non-publicly traded companies that can be vested in fossil fuels companies, but that the state by law need not disclose. 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 pension watchdog groups like the Chicago-based Private Equity Stakeholder Project.

According to the Treasurer’s Office, about 3.7% of the portfolio — or $3.73 billion — is invested in fossil fuels.

The Net Zero plan would end new investments in private equity funds that intend to put money primarily into fossil fuels, and triple from $2 billion to $6 billion “climate positive” investments in private equity and real assets. It would also ensure at least 40% of public investments are held in enterprises that reduce greenhouse emissions or have plans to transition toward net-zero emissions by 2035.

A study the Oregon Treasury in 2021 commissioned from the international financial consultant Ortec Finance showed the Treasury’s current asset values could decline nearly 40% by 2060 due to the effects of climate change on those investments.

Another proposal this session, Senate Bill 681 or the “Pause Act,” would have put a five-year moratorium on all new private equity investments made with PERS funds, if more than 10% of the private equity fund is invested in fossil fuel companies or heavy users. The bill hasn’t moved from the Senate Finance and Revenue Committee since March, where it received a public hearing and hundreds of letters of testimony in support.

Divest Oregon, a coalition of nonprofit climate, public health and social justice advocacy groups, backed that bill.

Andrew Bogrand, a spokesperson for Divest Oregon, said in a text that the coalition is encouraged that House Bill 2081 passed with bipartisan support and the endorsement of major labor unions that represent PERS beneficiaries. Still, he said, there is more to be done.

“It is only a first step toward addressing climate risk. Critically, the bill fails to focus on fossil fuel holdings within private investments, which comprise nearly 60% of PERS holdings and represent substantial climate risk,” he wrote. “As we applaud the passage of HB 2081, our coalition will continue to call on Treasury to ‘press pause’ on these private fossil fuel investments.”