PensionsFebruary 9, 2024

Oregon Plans for Net Zero Portfolio by 2050

Significant climate investments aim to reduce the portfolio’s carbon emissions by 60% by 2035.

Reported by Matt Toledo

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.”

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.