Oregon’s public pension fund may gradually divest itself of an estimated $1 billion in publicly traded investments in coal companies — but not oil and gas — under a bill that has been negotiated by legislative advocates and state Treasurer Tobias Read.

Two key legislators say the new legislation — House Bill 4083, which a House committee heard on Thursday, Feb. 8 — does not go as far as their original proposals, which failed to advance in the 2023 session. Those bills would have included state investments in all fossil-fuel companies — the exact extent of which are uncertain — and provided for a quicker divestiture than the 2050 target Oregon has set for 90% reduction in current levels of greenhouse gas emissions. The 2023 bill would have set 2035 as the deadline.

But Rep. Khanh Pham of Portland and Sen. Jeff Golden of Ashland, both Democrats, say the bill is a step forward to align state investments with Oregon’s broader policies to reduce greenhouse gases responsible for climate change.

“It’s a simple, narrowed-down version for a short session,” said Pham, who has been negotiating with Read and his staff since the 2023 session resulted in no bill.

Sen. Deb Patterson, a Democrat from Salem who appeared with Pham and Read at the committee hearing, said this: “The bill will safeguard our natural environment and keep our communities healthy.” Patterson leads the Senate Health Care Committee.

The new bill calls for no new investments in publicly traded stock of coal companies, advises (but not mandates) that existing investments should be phased out by 2050, and requires that the treasurer report to the Legislature by Jan. 15 every year.

Only one state (Maine) has divested itself of fossil-fuel investments, but several university endowments have, including those held by Oregon’s public universities.

Treasurer’s plan

A couple of days earlier, Read — a Democrat who cannot seek a third consecutive term as treasurer — presented a plan to the Oregon Investment Council for a broader divestiture by 2050. The plan calls for gradually increasing investment in public equity (stocks) related to the transition to alternative energy, raising the state’s share of such investments in private equity and real assets from $2 billion to $6 billion by 2035 — and no new investments in primary fossil-fuel ventures.

“The issue of climate change is an urgent risk to investment returns,” Read said, particularly for the Oregon Public Employees Retirement System (PERS) fund, 15th largest of its kind in the nation, which stood at $93.8 billion in January.

The treasurer is one of five council members, but is not its chair. The others are appointed by the governor and confirmed by the Senate.

But like most of his predecessors, regardless of party, Read has opposed legislation specifying what state investment policies should be. That insistence goes all the way back to the 1970s, when then-Treasurer Bob Straub — elected governor in 1974 — instituted investments as a way to grow state funds.

“The investment environment gets more complicated” when lawmakers do so, Read told the committee.

“Our sole responsibility at the treasury is to achieve strong returns for the Public Employees Retirement Fund. It is not an abstract thing. Our fiduciary responsibility is not an option. It is a legal and ethical obligation.”

Past restrictions

Oregon does have a couple of restrictions on state investments written into law. In 2005, lawmakers barred investments with companies doing business in Sudan, following genocide in the Darfur region. In 2012 they passed a similar restriction on companies doing business in Iran. But Read said both laws were written with guidance from previous state treasurers.

“They provide a sense of the direction that the Legislature would like the Treasury to pursue,” said Read, who was a state representative for 10 years before he was elected treasurer in 2016. “But they do that in a way that gives the Treasury the flexibility that does not undermine our fiduciary responsibility.”

Read said the latest bill does the same. It affects only investments in PERS, not the smaller pools for SAIF Corp. or local governments. Of every dollar paid out in pensions to about 160,000 retired public employees, Read said, 74 cents comes from investment earnings. (PERS covers about 200,000 active workers in state and local governments.)

The Legislature also did something similar in 1987 with investments in companies doing business in South Africa, which had a white minority government that forcibly separated the races under a policy called apartheid. The law passed two years after a Republican governor vetoed it, but one year after Congress overrode President Ronald Reagan’s veto of federal legislation.

Lawmakers repealed Oregon’s law in 1991, after Nelson Mandela was released from prison and South Africa made a gradual transition to a Black majority government, which Mandela was elected to lead as president in 1994.

The chief sponsor of the 1987 law was then-state Sen. Jim Hill of Salem, who himself was elected state treasurer in 1992 — the first African American elected to statewide office.

Pham said that even though the new bill does not compel a specific shift in investments, it would indicate the general direction that lawmakers want the state treasurer to take.

“No law compels the next treasurer to follow through, should that person decide to take a different approach or abandon climate goals altogether. The Legislature can make sure that we keep moving forward,” she said. “Passing this act into law will ensure that Oregon continues to advancing our climate goals no matter who occupies our treasurer’s office.”

Money aligns with policies

Since Portland General Electric shut down its Boardman plant in 2020, Oregon does not have coal-fired power plants within its boundaries. But PGE and Pacific Power, the state’s largest private utilities, still import such power from other states. Under a law that then-Gov. Kate Brown signed in 2021, the utilities must submit plans to the Public Utility Commission showing how they will generate carbon-free power by 2040.

Although a recent Oregon Court of Appeals decision sent it back for a new round of hearings, the Environmental Quality Commission developed a plan in 2021 for Oregon to reduce greenhouse-gas emissions from industrial plants and other sources by 90% by 2050.

Sen. Jeff Golden, who co-sponsored Pham’s bill in 2023 and has signed on to the latest effort as chief Senate sponsor, said this during an interview:

“A core principle held by a lot of us says our public investments should not undermine our public policies. You have to question investments in things that make it harder to achieve our basic policies. Climate change is a primary example.

“I am concerned that we are putting billions in public funds that capitalize more oil and gas development — whether it is exploration, drilling, pipelines or refineries. We are making the hole deeper and pushing off the time we can make a full transition to clean energy. So it is hard to see that we work in this building in so many ways to reduce carbon emissions — while a couple of buildings down the Capitol Mall, the state Treasury is investing in activities that will prolong those industries. That makes no sense.”

He said of Read’s target of 2050: “That is way too slow, given what we are seeing in this state and all over the world. But it is movement on his part.”

Golden acknowledges that even a partial divestiture will take time.

“We understand that you lose money if you rush into it,” he said. “We do not want any more purchased. That strikes me as a straightforward and obvious thing to do if you are concerned about coal emissions. We would like to get something over the line this session.”

How others testified

Virtually all of the 150 statements submitted to the committee supported the bill. Just three did not.

Susan Palmiter said for Divest Oregon — a coalition of more than 100 groups that requested the bill — that a similar 2015 law in California has resulted in a benefit of $598 million for its pension fund during the first six years of divestiture.

“The shift is coming quickly and Oregon should not be the last one to try to sell their coal assets,” she said. “This is yet another reason why the COAL Act must be passed in 2024.”

Alan Journet of Jacksonville, writing for Southern Oregon Climate Action Now, said this for the bill: “As rural Oregonians, we live on the front lines of the warming, reducing snowpack, heat waves, drought and the increasing wildfire risk that these trends conspire to produce. Climate science tells us these trends will continue into the future. Because of this, we pay close attention to what is happening in Salem in terms of legislative proposals.”

Donna Bleiler of Salem opposed it: “This is a violation of fiduciary responsibilities and requires a glass ball to predict if an investment will accomplish no monetary loss. Political agendas do not mix with best practices for investments.”

But Peter Bergel of Salem differed: “It eludes me how the step of pulling public money under the state’s control out of investments incompatible with our climate change goals can have eluded the Legislature until now. HB 4083 corrects this oversight.”