Proposal to divest Oregon state retirement fund of coal stocks nears final vote

The Oregon State Treasury could soon offload up to $1 billion of stocks held in companies that mine and burn coal.

House Bill 4083, also known as the COAL Act, would direct the Treasury to divest the state’s $94 billion Public Employee Retirement System, or PERS, of its holdings in publicly traded companies that derive 20% or more of their revenue from coal production. It would also put limits on any new investment in such companies. 

The Senate Committee On Energy and Environment passed the proposal Tuesday on a 3-2 partisan vote led by Democrats and sent it to the full Oregon Senate for a vote that has not yet been scheduled. The act has already passed the Oregon House. It has the support of Oregon State Treasurer Tobias Read, who is finishing his final term this year as the state’s chief investor, and who is also proposing a plan to get PERS investments to “net-zero” emissions by 2050. 

The COAL Act is sponsored by Rep. Khanh Pham, D-Portland, who has tried for three years to pass legislation limiting fossil fuel investments in PERS to address the threat of climate change and financial risks. In earlier testimony, she called coal a “stranded asset.”

“Solar and wind energy are now cheaper, cleaner and growing so much faster, that it is more expensive for 99% of the country’s coal-fired power plants to keep running than it is to build entirely new wind or solar energy operations nearby,” she told colleagues at a hearing on the bill last week. 

In 2001, coal was the largest source of electricity in 32 states. Today, just 15 states still get most of their electricity from coal, according to the U.S. Energy Information Administration. Most have shifted away from coal and primarily burn natural gas, which is almost entirely the fossil fuel methane, and rely on renewable sources such as wind and solar. 

Investment earnings

About 75% of all benefits paid out to PERS retirees come from earnings on Treasury investments, according to the agency. More than 160,000 PERS retirees currently receive an average of $34,000 per year from the fund. 

About half of the $94 billion PERS fund is in private equity funds and real assets, which include investments in infrastructure, commodities and natural resources. Private equity assets are overseen by investment managers hired by the state, and little is publicly shared about the companies within these portfolios. But the other half of PERS is largely made up of investments in publicly traded companies. Up to $1 billion of that is invested in companies that mine and burn coal, according to the nonprofit environmental and justice coalition Divest Oregon.

Under the COAL Act, the Treasury would be directed to divest what it has in publicly traded coal mining and energy companies and to limit any new investments in such companies. 

‘Net-zero’ plan

Earlier this month, Read presented a plan to the Oregon Investment Council that would begin the process of getting PERS holdings to “net-zero” carbon 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 2050.

Since 2019, Read and the investment council have doubled PERS investments in renewable energy from nearly $370 million to $717 million, but these still represent less than 1% of the fund’s overall investments. Though they’ve reduced investments in fossil fuels by about $100 million in that same time, fossil fuels represent a far greater share of the overall PERS portfolio than renewables. More than $3.5 billion is invested in fossil fuels, about 3.7% of the total fund. 

CORRECTION: A previous version of this story said the Treasurer planned to get PERS to “net-zero” by 2035. The target is 2050, with a 60% emissions reduction benchmark to reach in 2035.