The state board responsible for managing public employees’ retirement funds has invested nearly $42 million in the companies behind the two proposed copper-nickel mines in northern Minnesota, both projects that involve state regulatory review.

The pension fund has another $32 million invested in oil pipeline operator Enbridge, which is seeking permits to build a controversial new pipeline across northern Minnesota.

The holdings are tiny pieces in a sprawling $95.7 billion investment portfolio. But they are not the only assets that are controversial or present potential conflicts of interest for public officials who oversee the investments.

Minnesota also has a financial stake in a number of energy and communications companies it regulates through the Public Utilities Commission (PUC), as well as in pharmaceutical and tobacco interests the state has sued.

Members of the State Board of Investment said they are far removed from decisions about what specific companies the state has invested in.

The board evaluates and makes recommendations on hiring external managers who handle decisions about stocks and bonds, said Mansco Perry, the board’s executive director and chief investment officer. The bulk of stocks are passively managed and based on vast index funds, such as the Russell 3000 that tracks the largest U.S. companies, he said.

“If it’s in there, we own it,” Perry said.

The four-person investment board is made up of elected officials, including Gov. Tim Walz and Attorney General Keith Ellison. They are charged with ensuring solid returns. But they are also involved in regulating and potentially investigating the companies behind the disputed mining and pipeline projects.

Opponents of the proposed mines near the Boundary Waters Canoe Area Wilderness question the state’s financial interest in the disputed projects, which have engendered a fierce public debate.

“Even if it is just a small, minute portion of the overall investments … these are elected officials that are entrusted by the public to make unbiased, fair decisions based on certain processes,” said Peter Marshall with Friends of the Boundary Waters Wilderness, which has opposed the copper-nickel mines. He said the State Board of Investment holdings, “sets up, at the very least, an appearance of conflict of interest. I think that does a lot of damage just for public trust.”

In addition to leading the state agencies that deal with the mining projects, Walz appoints members of the PUC. The commission is responsible for ensuring that companies in the electricity, natural gas and telephone industries are providing quality services at reasonable rates.

Meanwhile, Minnesota has $244.5 million invested in Comcast and more than $38 million in Xcel Energy, among many other holdings in PUC-regulated companies, according to the most recent asset listing from the end of 2018.

“The Governor has many responsibilities, and some of them — like his fiduciary duty to protect the retirement plans of hardworking Minnesotans — cannot be subject to his personal opinions,” Walz’s spokesman Teddy Tschann said in a statement. That’s why he relies on the board’s experts and an Investment Advisory Council to make investing decisions, Tschann said.

Their dual responsibilities create an “optics issue,” Ellison said, but noted that professional portfolio managers do 99% of the investment work.

The makeup of Minnesota’s State Investment Board is unusual, said Keith Brainard, research director for the National Association of State Retirement Administrators. Many other states give the responsibility to a board or committee that more closely resembles Minnesota’s Investment Advisory Council. That council provides advice and is made up of local finance and investment professionals, retirement association and system directors and an employee representative.

Putting four elected officials at the helm requires them to set aside their other interests and focus only on their fiduciary responsibilities, Brainard said.

“They are to make decisions solely in the interest of the participants of the plan. They may not wear two hats. They may not consider other factors, other than the best interest of the participants of the pension plan,” Brainard said.

That is likely not too hard with the mining companies, he said, because the size of the state’s mining investments are an “immaterial” fraction of its overall assets.

The state has nearly $5 million of stocks in Chilean mining conglomerate Antofagasta, which is behind the Twin Metals mining project near the Boundary Waters. That mine is still in the early stages of the regulatory process and preparing to submit an official mine plan by early this winter.

Minnesota’s asset portfolio also includes about $37 million in Glencore PLC and its subsidiaries Glencore Funding LLC and Glencore Finance Canada. Glencore is the majority owner of PolyMet, which is planning a copper-nickel mine and processing plant near Babbitt.

That project is further along than Twin Metals’, though it has faced permitting and legal challenges.

Environmental advocacy groups, worried about the mines’ impact on water quality and public health, sent Ellison a letter Monday asking him to look into Glencore’s relationship with PolyMet, following its recent purchase of the bulk of PolyMet shares. They wrote that Glencore has an “extensive history of troubling conduct.”

While the investments might be comparatively small, they are still concerning for retiree Emily Moore, who spent 22 years working for the Minnesota Pollution Control Agency.

She does not want a portion of her retirement funds in companies like Enbridge. The company has been going through the permitting process to replace its Line 3 — which extends through 337 miles in Minnesota — with a new pipeline that could carry more oil.

Moore founded Divest-Invest Minnesota, a group that has been trying to get the state investment board to divest its funds in the fossil-fuel industry and shift them to renewable companies.

Sen. Sandra Pappas, DFL-St. Paul, introduced a fossil-fuel divestment act in the past session and said she will continue to push for it next year. She said Walz might have a stronger interest in the idea than former Gov. Mark Dayton did.

This is not the first time advocates have pushed the board to alter its investments. A similar fossil fuel-focused effort fizzled in 2016, and in 2015 social justice activists called for the state to remove Israeli government-issued bonds. Dayton responded by proposing that the state continue investing in Israeli bonds if the rate of return was competitive.

The Legislature has successfully passed laws restricting investments in Sudan and Iran. The “cleanest and clearest way” to make divestment decisions is to have legislators do it, rather than the board, said Secretary of State Steve Simon, who is also on the Board of Investment, along with State Auditor Julie Blaha.

Perry, the board’s executive director, is wary of removing investments in a particular company, whether it be Enbridge or ExxonMobil. He said it can be more effective to retain the stocks or bonds, keep a seat at the table and push the company to change.

Perry said his job is to maximize returns for public employees, and removing fossil-fuel companies from the portfolio now would leave money on the table. Moore is skeptical about the change-from-within approach. She questioned what has resulted from those efforts.

Blaha said she is open to a divestment conversation if there is a way to backfill the dropped stocks and bonds. However, she said the board needs a clear understanding about potentially reduced returns.

“Our job is to keep our promise” to retirees, Blaha said. “To give them what they earned.”