By Nigel Jaquiss

Divestment from companies that invest in fossil fuels is an enormous issue for pension funds across the country—and in Salem.

In simple terms, advocates want pension fund managers hired by the Oregon State Treasury to pull pension investments out of companies such as ExxonMobil, Chevron, BP and thousands of smaller companies, both publicly traded and private, that invest in oil, gas and coal and to reinvest the money elsewhere. Divestment as a tool for change goes back to at least the mid-1980s, when US pension funds dumped South African stocks, a tactic historians credit for contributing to the end of apartheid. Since then, activists have pushed fund managers to shun tobacco stocks, arms makers, coal producers, and investments in Iran and Sudan.

Divestment can force change, but it can also bring risk: In a 2020 analysis of the impact of six different divestment programmes, CalPERS, the nation’s largest public pension fund, reported that the tactic had cost pensioners more than US$2 billion over the previous two decades—all of it related to selling tobacco stocks.

Now, Oregon lawmakers are proposing that this state’s pension funds, including the US$90 billion Oregon Public Employees’ Retirement Fund, pivot away from fossil fuel-related investments. It’s an emotional argument laden with facts, figures and charts, and it’s a rare issue that divides Oregon’s largest public employee unions.

Here are the details:

Chief Sponsors: State Reps. Khanh Pham (D-Portland) and Mark Gamba (D-Milwaukie), and state Sen. Jeff Golden (D-Ashland)

What it would do: Prohibit the State Treasury from making any new investments in fossil fuel companies and require that all funds the treasury oversees sell all publicly traded stocks on the “Carbon Underground 200 List” (a compilation of energy stocks) within six months of HB 2601 going into effect.

Problem it seeks to solve: In a public hearing last week, the chief sponsors eloquently described the large and growing impact that burning fossil fuels has on the climate. They and nearly 100 groups in Oregon argue that investing in fossil fuels is both contrary to Oregon’s carbon reduction goals and causes current harm, and is a bad long-term investment since fossil fuel stocks will lose value as consumers shift to greener alternatives. They take aim at Oregon’s publicly traded stocks, which are easy to spot, and they demand scrubbing the Oregon Investment Council’s hefty investments in private equity funds—run by the likes of KKR & Co.—which are opaque and illiquid. “We have an exceptionally hard time grasping what’s going on” with private energy investments, Sen. Golden said. “More than any other states, we don’t know what we’re investing in.”

Who supports it: Divest Oregon and just about every environmental organization in the state, along with some unions whose members have skin in the game, including the Oregon Education Association and the American Federation of Teachers. While many of those groups focus on climate hazards, two highly experienced investment professionals, chief investment officer at Rain Capital Management, Chris Abbruzzese and Thomas Sanzillo of the Institute for Energy Economics and Financial Analysis argued last week that divestment would in fact reduce the risk of losing money. “Fossil fuels have been major contributors to investment portfolios and the world economy for decades,” Sanzillo said. “This is no longer the case. Exiting from fossil fuels is a strategy designed to protect institutional investment funds from losses.”

Who opposes it: Some longtime lawmakers, such as Senate Minority Leader Tim Knopp (R-Bend), are leery of the Legislature setting investment policy for money that belongs to pensioners who expect maximum returns. “The bill makes a damaging assumption that the money belongs to the state,” Knopp testified. State Treasurer Tobias Read, whose agency, under the direction of the Oregon Investment Council, invests Oregon’s pension money, says divestment reduces options and would cost pensioners about US$90 million a year through lower returns. State and local government employers would have to make up those losses with increased pension contributions. That, in turn, could require higher taxes or cuts in services. One of the big three public employee unions, the American Federation of State, County and Municipal Employees, agrees with Read. So does Oregon AFSCME political director Joe Baessler. His 25,000 members worry that the bill “could cause a significant increase in the unfunded liability and an increase in PERS employer rates,” Baessler testified. Testimony on the bill continues Feb. 23.

• Jaquiss joined Willamette Week in 1998. He covers politics.