Democratic lawmakers and environmental groups want the Oregon Treasury to divest billions of dollars in fossil fuel holdings from the public employee retirement fund.
They say it’s a moral and financial imperative in light of climate change and projections showing declining demand for fossil fuels as renewable energy demand rises. Opponents say it would risk negatively impacting the retirement benefits of hundreds of thousands of state employees.
Stephen Siegel, a special education teacher and one of three regional vice presidents for the Oregon Education Association, the state’s largest teachers’ union, gave testimony supporting the bill. Siegel and the association’s 60,000 members are enrolled in the state pension fund.
“We believe there should be ethical, moral and transparent professional standards of conduct for how members’ retirement money is invested, and that those standards should not be overshadowed by a desire for a high return on investment,” he said.
The 2023 Oregon Treasury Investment and Climate Act, or House Bill 2601, would require the Treasury to disclose all of its investment holdings and to stop investing in “carbon-intensive” holdings, defined as investments in coal, oil and gas companies, and providers of equipment, services, transportation or storage related to oil and gas.
The bill would require the state to divest from companies, including oil giants Exxon Mobil, Shell and Chevron, that are on one of three lists produced by nongovernmental organizations. It also would direct the department to invest in companies working on climate-safe solutions, defined as entities that earn most of their revenue from practices that help with mitigation, adaptation and resilience against the impacts of climate change.
These include renewable energy companies, some companies in the forest-sector and construction companies developing low-carbon buildings. Chief sponsors of the bill are state Reps. Khanh Pham, D-Portland and Mark Gamba, D-Milwaukie, and state Sen. Jeff Golden, D-Ashland.
The Treasury manages $137 billion in investments. More than $90 billion of that is vested in the state’s Public Employees Retirement System, or PERS, providing a pension for nearly 400,000 Oregonians.
At least $5.3 billion of the state’s total holdings is invested in fossil fuel companies, according to the nonprofit environmental group Divest Oregon. These include holdings in coal, natural gas and tar sands companies. It’s possible more public retirement money is invested in fossil fuels through private equity funds that the Treasury invests in, but those holdings don’t have to be disclosed under state law.
Opponents of the bill, including several large unions whose members are enrolled in the state retirement fund, say that divesting of fossil fuels entirely is too risky, and that the Treasury would be potentially losing money that belongs to individual pension holders, not to the state itself.
More than a dozen people spoke about the bill during a Thursday public hearing at the House Committee On Emergency Management, General Government, and Veterans, and most of them supported the bill. More than 120 people and groups have submitted written testimony in favor of the bill, and 12 have submitted testimony in opposition.
The state retirement money is managed by the state Treasury under the guidance of the state treasurer, Tobias Read and the oversight of the Oregon Investment Council, a governor-appointed group of four. Read told lawmakers in a January letter that he believes the proposal is too risky.
A significant portion of the state’s investments are in private equity funds, and do not need to be disclosed to the public under state law. This is the first issue that must be addressed, according to advocates of the bill.
Rick Pope, a retired lawyer, accused Read of deliberately withholding information from lawmakers and the public. Pope used public records requests to obtain a report last year that was commissioned by the state Treasury, which found the retirement system would be negatively impacted if it continued to keep investing in fossil fuel holdings over the next five years.
Many advocates of the bill called Read out for being slow to respond to the climate emergency.
“The treasurer has pointed out that statutory interventions into the investment process are extraordinary. They are. Climate change is an extraordinary phenomena,” said Tom Sanzillo, director of financial analysis for the Institute for Energy Economics and Financial Analysis, a left-leaning think tank.
“No country on earth has found it easy to adopt solutions. The Legislature’s consideration of House Bill 2601 is a recognition that the climate issue is serious, and the choices are difficult but necessary,” he said.
Joana Kirchhoff, a member of the social activist group Portland Raging Grannies, wrote in submitted testimony that the group joins tens of thousands of beneficiaries of the state’s pension system — including the teachers’ union — in supporting the bill.
But another large union, Oregon AFSCME, which represents over 25,000 state, county and municipal employees, came out against the bill, along with Oregon PERS Retirees, Inc., an association and lobbying group with about 10,000 members who rely on the state retirement fund.
The group’s lobbyist J.L. Wilson said in written testimony that recipients of the state retirement fund are already getting small returns.
“The reality is, with a $33,000 average pension benefit, retirees don’t have the luxury of lesser investment returns,” Wilson wrote. A survey of association members during the week of Feb. 6 found that more than half oppose the legislation, Wilson noted.
State Sen. Tim Knopp, R-Bend, spoke against the bill at Thursday’s hearing.
“House Bill 2601 makes, I think, a very damaging assumption that the retirement funds of public employees actually belong to the state of Oregon,” he said. “That assumption is both dangerous and wrong. The money belongs to public employees. It belongs to firefighters, police officers, teachers and all those Oregonians who do the everyday work in the state.”
In a letter to lawmakers in January, Read wrote that no matter how well-intentioned, any effort to limit investment opportunities in the state pension fund would negatively impact retirement funds for the thousands who rely on it. He said employers and employees would be required to contribute more money to cover what he believes would be losses.
“When public entities must direct more money to cover their retirement system obligations, they have less money for the classroom, the firehouse, child welfare offices, and other state and local government services,” he wrote.
In November, Read pledged to get the fund to “net zero” by 2050. This would mean that as a whole, the state’s investments would result in zero greenhouse gas emissions.
The plan will be presented to the state Investment Council in February 2024, according to the Treasury office’s communications director, Amy Bates.
“Immediate and broad sector-based divestment by the Oregon state Treasury is likely inconsistent with its fiduciary duty,” Read wrote of the Treasury. “Instead, ‘divestment’ should be used as a risk-reduction measure,” he said.
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