Americas

Oregon Leads Way on US Climate Plans 

OPERF announces intention to reach 60% emissions reduction by 2035, with other state initiatives expected to follow. 

The Oregon State Treasurer disclosed plans earlier this month to transition the Oregon Public Employees Retirement Fund’s portfolio (OPERF) to net zero, as more US states prepare to launch transition plans for their public pension funds. 

Dave Wallack, Executive Director of US state treasurers network For the Long Term, told ESG Investor he expected more members to move in same direction as Oregon State Treasurer Tobias Read on climate transition, including in Illinois and Massachusetts. 

Read announced his decision to the Oregon Investment Council – which selects investments on behalf of OPERF – on 6 February, following the example of New York City (NYC) Comptroller Brad Lander. Last year, Lander announced a four-step plan to ensure that NYC investment portfolios reach net-zero emissions by 2040.  

“By prioritising strategies that support transition and decarbonisation, we avoid simply shifting the emissions burden to other investors while not doing anything to mitigate climate change,” said Read. “Financing climate solutions and increasing our corporate engagement will generate more emissions reductions while also producing stronger, sustainable long-term returns.”  

An assessment included in the 97-page document outlining the path to net zero for OPERF found that the highest risks to the fund lied with fossil fuels investments. The document also stated that the US faced significant climate risk, with approximately 66% of OPERF’s portfolio investments located in the country. As such, making no changes to its strategy would likely result in losses for the pension fund. 

Private markets focus 

As part of the new plan, OPERF will aim to achieve net zero portfolio emissions by no later than 2050. It will have an interim target of a 60% reduction in portfolio emissions by 2035, relative to a 2022 baseline.
To help achieve this goal, the pension fund will triple investments in real assets and private equity over its existing US$2 billion of climate-positive holdings. It will also ensure that 10% of active, and 30% of passive, public equity investments are climate- or transition-aligned, contributing to a clean energy transition by 2035.  

Other actions that OPERF will take include the exclusion of new investments in private market funds that invest mainly in fossil fuels, and the review of its carbon-intensive fossil fuel investments in public markets by next year. It will also switch passive investments to climate-aligned indexes.  

In addition, the pension scheme will push for credible transition plans from private market investments that derive more than 20% of revenue from carbon-intensive fossil fuel activities, and increase the share of portfolio emissions covered by credible net-zero transition plans.  

It will expand its engagement activities, partner with other pension funds on net zero goals and establish an advisory net zero-focused committee, which will meet with Oregon State Treasury officials to provide feedback progress at least twice a year.  

“All these actions combined will empower the fund to carefully and deliberately address the financial risks of the climate crisis in a way that preserves its ability to fulfil responsibility to Oregon’s firefighters and teachers many decades into the future,” said Wallack. “What [State Treasurer] Read has done is a model for other public funds. OPERF won’t be the last US pension fund to craft a decarbonisation plan – other folks who are part of our network are engaging in similar initiatives.”  

The Oregon Investment Council is due to assess the net zero transition plan before it goes to lawmakers, who will decide whether to take it forward. 

 

 

The practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

Copyright © 2024 ESG Investor Ltd. Company No. 12893343. ESG Investor Ltd, Fox Court, 14 Grays Inn Road, London, WC1X 8HN

To Top
Share via
Copy link
Powered by Social Snap