The former head of Oklahoma’s largest public employee association has filed a lawsuit challenging the state’s anti-ESG law as unconstitutional and harmful to state pensions for government employees.
Former Oklahoma Public Employees Association President Don Keenan’s suit asks the Oklahoma County District Court to block the law’s implementation and prevent Oklahoma Treasurer Todd Russ from executing it.
Mr. Keenan accused Mr. Russ of attempting to “play politics with state employees and retirees’ money.”
“The pension system is not taxpayer money; it is compensation earned by active employees who currently pay into the system and the pensioners who contributed to the same system for decades,” Mr. Keenan said in a statement. “The decision to pursue legal action against Todd Russ was not taken lightly, but we feel it is necessary to strengthen the fiduciary responsibility of our pension systems.”
A 2021 state law placed several of the world’s largest investment firms and banks on a blacklist generated by Mr. Russ. The firms on the list used an investment strategy that includes environmental, social and governance considerations — or ESG — and thereby allegedly avoided fossil fuel-related businesses because of climate change.
The blacklisted companies included BlackRock and State Street, the latter of which the Oklahoma Public Employees Retirement System has roughly 60% of its $10 billion in assets.
The Oklahoma Public Employees Retirement System’s board of directors in August approved a fiduciary duty legal exemption to not divest after the pension system estimated it could cost them $10 million from lower returns and fees. Mr. Russ, a member of the board, cast the only vote against the exemption and said the board was violating the law.
“The spirit and intention of the law is to protect Oklahomans and the economic base of the state,” Mr. Russ said in response to the lawsuit. “I will be happy to work with the Legislature in the future.”
Mr. Keenan alleged the law, in addition to hurting the pension, was unconstitutional because it “violates the first amendment for compelling speech, viewpoint discrimination and content discrimination.”
Oklahoma is one of dozens of red states to enact anti-ESG laws and fight against “woke capitalism.” The anti-ESG movement has seen widespread legislative success in the U.S. and caught much of the financial world flat-footed.
However, there’s been some setbacks even in Republican-dominated states where pension managers and banking associations warn that blacklisting major financial institutions would cost state pension funds more money and hurt returns on investment.
The State Financial Officers Foundation, a non-profit that has worked closely in recent years with Republican state financial officials on anti-ESG measures, said laws like Oklahoma’s have been enacted in other states without violating fiduciary duties.
“They are a prudent legislative step to safeguard states from banks and asset managers who by their own admission pursue goals that are antithetical to the state beneficiaries’ economic interests,” the group’s CEO, Derek Kreifels, told The Washington Times. “State financial officers have dutifully applied these laws, while fulfilling their fiduciary duty.”