Though other climate-change legislation is proceeding, Oregon lawmakers will not advance a bill prompting faster divestiture of state investments in coal, oil and gas companies.

House Bill 2601 would have compelled action by the state treasurer and the Oregon Investment Council by 2035, well before the 2050 target that current state Treasurer Tobias Read has set, and which also is Oregon’s goal to reduce greenhouse-gas emissions by 90% from current levels.

A House committee conducted two public hearings in February and March, but failed to move the legislation by a deadline of April 4 despite an effort by its chief sponsor and others to work out a compromise.

Though the divestiture legislation drew more attention, lawmakers are advancing less controversial bills to promote voluntary carbon-capture projects on forests and farmland (Senate Bill 530) and require energy-efficiency measures in construction of all types (SB 868-SB 871).

Oregon’s major investment is in its Public Employees Retirement System, which as of February had amassed $95.9 billion, making it the nation’s 15th largest public pension fund and the 17th largest overall. Coupled with contributions from government employers and the workers themselves, investment earnings from the fund provide the money for PERS payments to retirees.

Differing views

The debate boiled down to a disagreement between Read, who is one of five members of the Oregon Investment Council, and legislators and environmental advocates who pressed for a speeded-up timetable for state divestiture from fossil-fuel companies. The council, whose four other members are appointed by the governor, set investment policies.

Rep. Khanh Pham, a Democrat from Southeast Portland and a chief sponsor of HB 2601, said this:

“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.”

Like virtually all state treasurers, Democrat and Republican, since Oregon began large-scale investments in the early 1970s, Read –himself a state representative for 10 years – said lawmakers should not attempt to set investment policy through legislation.

In a letter he released when the House committee began its Feb. 16 hearing, Read wrote:

“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 limiting Oregon’s investment choices through statute will automatically or easily be revenue-neutral or yield higher returns are pure fiction. Instead, these restrictions will almost certainly lead to a reduction in investment returns and the benefits OPERF payments afford communities across our state.”

Read is in the final two years of his second term. He is barred by law from seeking a third consecutive term in 2024.

The Oregon Legislature has approved two divestiture measures in recent history. In 1987 – following a similar bill vetoed by Gov. Vic Atiyeh in 1985 – lawmakers required the state to divest investments in companies doing business with South Africa, then under white minority rule. That divestiture had not been fully completed in the early 1990s when long negotiations resulted in a transition to a Black majority government in 1994, when Nelson Mandela was elected president. Lawmakers also passed a similar divestiture in 2005, when Sudan was accused of atrocities in its fight against rebels in Darfur.

Allied opponents

Speaking on behalf of the American Federation of State, County and Municipal Employees/Oregon, which represents the second-largest group of state workers, Joe Baessler said he agreed with Read:

“We support the goal of this bill and would like to see the state move away from fossil fuels. However, we also are concerned about the impact of this bill on the investment portfolio…. We believe that the treasurer’s approach to divestment over time in a prudent manner to protect the benefits is a better solution. 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.”

Baessler got support from an unusual source: Senate Republican Leader Tim Knopp of Bend, who as House majority leader in 2003 led the House committee that revamped the public-pension system to make it more or a blend between investment earnings and employee contributions.

Knopp said this on Feb. 16:

“Oregon courts have affirmed over the past 30 years that the money in the Public Employee Retirement Fund 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,”

But the Oregon Education Association and the American Federation of Teachers-Oregon supported the bill.

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

What supporters say

Some of the debate focused on Oregon yields from private equities, which constitute a significant share of state investments but are also more shielded from public scrutiny.

Speaking on behalf of Divest Oregon, Susan Palmiter said that of the nation’s 15 largest public-pension funds, Oregon PERS had the highest share of private equities at 26.4% — far more than any other fund on the 2021 list – but the 10-year return on investment was 8.8%, less than the 8.9% average for all pension funds and 9.2% average for the 15 largest 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’ as a way to deal with the climate risk to the portfolio. There is much evidence that this approach does not work to protect portfolios or the climate.”

Sen. Jeff Golden, a Democrat from Ashland and the bill’s chief Senate sponsor, said Read posed a false choice, given that fossil-fuel companies will lose financial ground as demand for carbon-free energy continues to rise to meet reduction targets in heat-trapping greenhouse gases.

“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 we can. On the other hand, we are financing the growth (in fossil fuels) that makes it harder to do.

“If a Martian came down here, it would have a lot of trouble understanding what is going on.”