Oklahoma state officials concerned that ESG is still being applied in state investments.
OKLAHOMA CITY—The Oklahoma State Treasurer wants to know why state retirement funds are being managed by a company that engages in Environmental, Social, and Governance (ESG) investment practices that he believes violate state law.
The Oklahoma Public Employee Retirement System (OPERS) hired New York-based investment advisor BlackRock to handle 60 percent of its assets. The company’s website states that it applies ESG principles in its work.
This may violate the Energy Discrimination Elimination Act of 2022 (EDEA).
At the Oklahoma State Pension Commission’s Sept. 12, 2023 meeting, Oklahoma State Auditor and Inspector Cindy Byrd, a member of the commission, recommended sending a letter to the OPERS board.
Ms. Byrd said she is curious why the company, on a list of six firms restricted from doing business with the state, was still so involved with OPERS. She said she has not seen any information that explains the situation.
“I think we owe it to everyone to be transparent. It sounds like we have more work to do,” Ms. Byrd said.
After the meeting, Joseph Fox, OPERS executive director, told Ms. Byrd that his organization was happy to be transparent. He told her he would be glad to provide any information she requested. According to Mr. Fox, there is a simple reason the information had not been provided.
“No one asked,” he said.
The oil industry has historically been a significant player in Oklahoma’s economy and continues to be a force in the state.
On May 9, 2022, Gov. Kevin Stitt signed the EDEA. The law requires the State Treasurer to maintain a list of investment firms that boycott energy companies. Companies on the list are prohibited from handling state funds.
Governor Signs Statement
Last March, Mr. Stitt joined 18 other governors in signing a statement touting their opposition to ESG.
“We as freedom-loving states can work together and leverage our state pension funds to force change in how major asset managers invest the money of hardworking Americans, ensuring corporations are focused on maximizing shareholder value, rather than the proliferation of woke ideology,” the statement reads.
The law guides state entities as they divest from prohibited firms. The guidelines are meant to prevent unnecessary losses from irresponsible divestments.
The law requires specific reasons to exempt a company from divesting immediately and provides timelines for divestments to help prevent losses.
One year after the law’s implementation, Commission Chairman and Oklahoma State Treasurer Todd Russ said he had questions about why BlackRock still handles more than half of OPERS’ investments.
He said he had received information that OPERS had claimed “an irrevocable catch-all exemption.”
Each Proposal Unique
Russ spent much of the meeting asking representatives of RVK, a consulting firm from New York, about best practices when submitting requests for proposals to asset management firms.
Jason Samansky of RVK told Mr. Russ that each request is unique and each firm has its requirements and abilities. He stressed that he was not involved in selecting BlackRock, did not know the specifics of its agreement with OPERS, and only provided general information in response to Mr. Russ’s questions.
“Each [request for proposal] is unique,” Mr. Samansky told the commission.
Russ also asked the commission’s lawyer, Ben Graves, if the commission would bear any liability if OPERS were found to be violating the law. Mr. Graves said he would have to review the law to be sure.
Speaking to Ms. Byrd after the meeting, Mr. Fox said the request that resulted in hiring BlackRock was made under the pressure of a deadline set by the law. He denied breaking the law and reiterated that he would provide Ms. Byrd and the commission with any information they requested.
“We will send you whatever you need,” he said.