Oregon Plans for Net Zero Portfolio by 2050

Oregon State Treasurer Tobias Read presented on Tuesday a plan to make the $93.8 billion Oregon Public Employees Retirement System’s investment fund net zero of greenhouse gas emissions by 2050. Read said the goal is to make significant investments in climate transition, with a goal to reduce carbon emissions from entities in the fund’s portfolio by 60% by 2035.

The Oregon Public Employees Retirement Fund currently allocates 28.1% of its portfolio to private equity, 19.9% to public equity, 18.3% to fixed income, 14.2% to real estate, 10.1% to real assets, 4.9% to diversifying strategies, 2.8% to opportunity and 1.6% to cash and miscellaneous.

In addition to a series of new investments related to the clean energy transition, the report from Read’s office recommended that OPERF “exclude new investments in private market funds that have a stated intention to invest primarily in fossil fuels.”

In public equities, the report recommended fossil fuel investments be reviewed over the next year to ensure “they meet Treasury’s minimum standard for energy transition readiness.”

Want the latest institutional investment industry news and insights? Sign up for CIO newsletters. 

Many of OPERF’s peers have also announced net zero targets. In its report, OPERF identifies peer funds with similar plans, such as some of the largest pension funds in California, New York, Ontario and Quebec. These funds, representing $2.793 trillion in assets, all have targets of 2040 or 2050 for their portfolios to reach net zero.

Reach Benchmark Targets

In order to meet its benchmarks, the report, presented at the Oregon Investment Council’s February meeting, proposed measures including:

Tripling investment in real assets and private equity from the existing approximately $2 billion of climate-positive holdings;
Ensuring 10% of active and 30% of passive public equities and fixed-income investments will contribute to a clean energy transition by 2035 and are climate- or transition-aligned;
Ensuring OPERF uses its leverage as limited partners in its existing private asset class investments “to push for credible transition plans from private market investments that derive more than 20% [of their] revenue from carbon-intensive fossil fuel activities;” and
Working to raise the share of its investments abiding by net zero by 2035 transition plans to 90% for real estate investments and 65% for both real assets and private equity.

Hitting these metrics would enable the fund to hit net zero by 2050, although the fund also provided scenarios that could enable a net zero portfolio by 2040.

According to the release, some elements of the net zero plan could be implemented immediately. Still, the fund will need legislative approval for certain parts of the plan, including hiring additional staff.

Alline Akintore Joins Oregon Investment Council

Bill Calls for Oregon to Divest From Fossil Fuels

Tags: Net Zero, OIC, OPERF, Oregon, Oregon Investment Council, Oregon Public Employees Retirement Fund (PERF), Tobias Read

Robust equity returns spurred the Massachusetts Pension Reserves Investment Management’s Pension Reserves Investment Trust Fund’s 11.4% return in calendar 2023, raising its total asset value to $100.9 billion. The performance fell just short of its benchmark’s return of 11.8%; however, this was an improvement from 2022. when it underperformed its benchmark by nearly 300 basis points.

The top-performing asset class in 2023 was U.S. large-cap equities, which returned 26.5% for the PRIT Fund’s investment portfolio, followed by U.S. small- and mid-cap equities, which gained 18.2%, and developed international equities, which rose 17.7% during the year. Timberland investments earned 11.4%, while U.S. high-yield bonds returned 12.1%, and private debt and private equity gained 9.9% and 6.8%, respectively.

Real estate was the only asset class that did not produce a return for the portfolio, losing 5.8% for the year. However, this easily outperformed its benchmark, which lost 10.8% in 2023. It was an off year for the fund’s real estate assets, which have three-, five- and 10-year returns of 9.1%, 7.9% and 8.8%, respectively.

The pension fund reported three-, five- and 10-year annualized returns gross of fees of 6.2%, 9.5% and 7.9%, respectively for the calendar year that ended December 31, topping its benchmark’s returns of 5.2%, 8.4% and 6.8%, respectively, during the same time periods. For the fiscal year that ended September 30, the PRIT fund reported total three-, five- and 10-year returns gross of fees of 7.4%, 6.8% and 7.8%, respectively, ahead of its benchmark’s returns of 5.7%, 5.9% and 6.6%, respectively, during the same periods.

Never miss a story — sign up for CIO newsletters to stay up-to-date on the latest institutional investment industry news. 

Private equity was by far the pension fund’s top-performing asset class over the past three, five and 10 years, returning 19.2%, 19.2% and 19.5%, respectively, during the time periods. This is nearly twice the return of real estate, the next-best-performing asset class, nearly three times the return of global equities and 10 times the return of its core fixed-income investments.

The PRIT Fund is a pooled investment fund that invests the pension assets of the Massachusetts Teachers’ Retirement System, the State Employees’ Retirement System and the Boston Teachers Union, along with any county, authority, district and municipal retirement systems that elect to invest in the fund.

As of June 30, the PRIT Fund’s asset allocation was 23% domestic equity, 17.4% private equity, 13.3% core fixed income, 11.7% international equity, 10.9% real estate, 8.4% portfolio completion strategies, 7.1% value-added fixed-income, 4.4% emerging markets, 3.1% timberland and 0.5% in overlay, with 0.1% in its global equity emerging-diverse manager program.