How much of the Washington State Investment Board’s portfolio is sunk into controversial fossil fuel investments is a bit in dispute, but a Seattle-based think tank that focuses on environmental issues thinks the figure is in excess of $500 million and could be in the billions of dollars.
The Sightline Institute published an online report Wednesday that cited two private-equity investments alone worth $250 million each, including funds in a private equity company linked to both a coal export proposal and oil-by-rail project. It also identified money the Oregon Investment Council put into those controversial energy projects.
But the Washington SIB is disputing the report’s details. Spokeswoman Liz Mendizabal said a screen of total investments shows the share of WSIB’s $75 billion trust fund that is devoted to coal investments is closer to $108 million, or 0.14 percent of total assets under management.
The question about the size of Washington’s investments in fossil fuel industries and associated infrastructure comes at a time Gov. Jay Inslee is looking for ways to help wean the Northwest economy off fuels that produce greenhouse gases contributing to global warming.
The investment board defends its investments, but the board did take action Thursday to adopt a new policy that would require it to take into account the real financial risks from global warming in specific investments. State Treasurer Jim McIntire proposed the rule, which was adopted without opposition and had been under discussion for some time.
“We are trying to get a better grasp on global warming,” McIntire, a second-term Democrat, said in a telephone interview earlier in the week. “We expect that our partners are going to be disclosing information about global warming risk that would have a financial impact. We’re going to be supportive of shareholder proposals (at companies) to require disclosure – not only about risks but also what are they doing to mitigate them.’’
At the same time, McIntire, who is serving as chairman for another day before handing off the reins to another board member, said the state investment agency isn’t going to veer away from such investments as it tries to produce as much value as possible for pensions and other funds it manages.
He said that even if Washington policy makers have concerns about fossil fuels or any other investment, it’s the board’s approach not to divest but to engage with the boards of the companies involved – using the leverage of an owner to steer company policies.
“What I want to emphasize, though, is our objective is to make money – we need to be able to make money,’’ McIntire said. “We are not going to get out of energy because there is money to be made there. Our objective is to make the most money with prudent risk.”
McIntire added that Washington is “not going to transition to a cleaner, lower CO2 level immediately just by going to pure alternatives. When you get 30 percent of your electricity from coal-fired plants (as utility Puget Sound Energy does), natural gas is going to be a big piece of that because it lowers your emissions by half. There’s got to be a transition.”
That may not sit well with environmentalists skeptical about the investment in infrastructure projects that are expected to remain in service for decades.
Sightline policy director Eric de Place, who coauthored the report with Nick Abraham, said they were stunned to find such large investments in projects that are politically controversial.
“We were only able to look at the private equity component … This really raises a cautionary flat about what other things might be out there,” de Place said. “There ought to be a lot more sunshine on the way the state is investing public monies.’’
The study authors pieced together their report using minutes from WSIB meetings and other documents that were used by private equity firms to pitch investment opportunities to the state.
One specific investment cited in the Sightline report is a $250 million investment in Global Infrastructure Fund II, which the report links to the Ruby Pipeline, a natural gas project of Kinder Morgan to ship fuel to the West Coast from Wyoming. Mendizabal said the investment in Ruby Pipeline is in Fund I, not II, so the state isn’t involved.
De Place said later that the preliminary report mischaracterized the Ruby Pipeline piece, but that Sightline stands by the rest of its report, which has been amended to correct the one mistake.
Sightline also identified a $250 million investment in Stonepeak Infrastructure Fund made in December 2012. Through it, the board funded the Vancouver, Wash.-based Tidewater Transportation and Terminals company that later entered into an agreement with Ambre Energy to send coal by barge down the Columbia River to Ambre’s Morrow Pacific project exporting coal; Oregon recently rejected permits for that project but the industry is appealing.