I want to clear up some misinformation circulating about legislation that's affected some state investments with companies that have Environmental, Social, Governance (ESG) policies.
Some are arguing that the Legislature and the state treasurers are inserting politics into the investment strategies of state retirement systems.
I must point out that it is the investment companies with ESG polices that are themselves inserting politics into the system. They are the ones using environmental, social and governance scores to determine if an industry should be boycotted or penalized.
Many financial institutions use ESG policies as an investment principle – rewarding industries that align on environmental, social issues and corporate governance polices, or punishing those they consider to be bad actors.
Some entities, for instance, have boycotted fossil fuel producers for environmental reasons, forcing a climate change agenda in a way that could prove harmful to the oil and gas industry, long a bedrock of Oklahoma's economy. Other institutions have penalized gun manufactures and others involved in the firearms industry. Still others include LGBTQ+ equality initiatives, transgender rights or abortion policies to inform their investment strategies.
To protect against such policies, the Oklahoma Legislature has passed or proposed legislation to ensure we are not investing with companies that have ESG strategies at odds with our priorities.
In 2022, for instance, the Legislature passed House Bill 2024, which created the Oklahoma Energy Discrimination Elimination Act. The law prohibits state contracts and pension system investments with financial institutions that discriminate against the oil and gas industry, which employees thousands of people and contributes mightily to the state's economy.
The act is administered by state Treasurer Todd Russ' office, but it was not his brainchild. He's merely the entity tasked with enforcing the law. After the act became effective, Russ notified a number of financial institutions that they are ineligible for state contracts.
The reasoning was that Oklahomans’ tax dollars and state pension funds should not be used to sabotage the state’s vital fossil-fuel based industries, nor the jobs represented.
A retired state employee sued the state treasurer, arguing his enforcement of the law is harming his pension. In response, an Oklahoma County District Judge issued a preliminary injunction against the statute in May, and a judge in July continued halting enforcement of the law. The state's attorney general is appealing that decision.
Another argument is that this legislation has caused an unnecessary increase in municipal bond borrowing rates.
These are valid arguments that should be explored to see if adjustments to the law are needed.
The House Banking, Financial Services and Pensions Committee will examine these and other concerns in an interim study on this issue scheduled for 9 a.m. to noon Wednesday, Oct. 23, in Room 5S2 at the State Capitol. It will be interesting to see what new information emerges.
In the meantime, however, it will be helpful for people to remember that such legislation was not a political knee-jerk reaction, but rather one designed to best protect the interests of all Oklahomans.
As always, if I can help in any way, please do not hesitate to contact me. You may reach me by email at carl.newton@okhouse.gov, or phone me at 405-557-7339. God bless you and the State of Oklahoma.
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