State retiree files legal challenge over Oklahoma’s bank boycott law

Pensioners could pay price of anti-ESG law, lawsuit alleges

By: - November 20, 2023 4:44 pm

A lawsuit aims to block enforcement of a state law that targets financial institutions with environmental, social and governance (ESG) policies. State Treasurer Todd Russ, a former state lawmaker, is tasked with carrying out the law. (Photo by Kyle Phillips/For Oklahoma Voice)

OKLAHOMA CITY — A retired state employee filed a lawsuit Monday to block the enforcement of a new law barring the state from working with banks deemed hostile to fossil fuel energy companies.

Former Oklahoma Public Employees Association President Don Keenan alleges the law that targets financial institutions with environmental, social and governance (ESG) policies is unconstitutional because it could force state pension systems to drop certain fund managers at a cost to retirees.

Keenan is asking an Oklahoma County District Court judge to find the Energy Discrimination Elimination Act unconstitutional and block its enforcement. He also seeks a temporary injunction to prevent State Treasurer Todd Russ from carrying out the law while litigation is ongoing.

The lawsuit argues the law conflicts with Oklahoma’s constitution and a requirement that decisions about the pension systems be made for the “exclusive benefit” of its beneficiaries.

Russ, a former state lawmaker, did not directly address the lawsuit in a statement.

“The spirit and intention of the law is to protect Oklahomans and the economic base of the state,” he said.

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The Public Employees Association, Oklahoma Retired Educators Association and the Keep Oklahoma’s Promises Coalition are backing the lawsuit, according to a news release.

The decision to take legal action against Russ was not made lightly, but the groups determined it was necessary to protect state pension systems, said Tony DeSha, executive director of the public employees group.

“We will not allow Todd Russ to play politics with state employees and retirees’ money,” he said in a news release. “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.”

As a result of the law passed in 2022 by Oklahoma’s GOP-led Legislature, state pension systems have had to re-evaluate how retirees’ retirement funds are being invested.

The Energy Discrimination Elimination Act tasked Russ’ office with maintaining a list of financial institutions that boycott fossil fuel companies. After surveying the financial companies with which the state does business, Russ determined six companies — pared down from 13 in May — engage in energy boycotts.

Those companies are Wells Fargo & Co., BlackRock Inc., JPMorgan Chase & Co., Bank of America, State Street Corp. and Climate First Bank.

The Oklahoma Public Employees Retirement System found that divesting from BlackRock and other financial institutions on Russ’ restricted list could cost about $10 million. About 64% of the system’s more than $10 billion in assets is held in funds controlled by blacklisted companies.

Despite objections from Russ, the Public Employees Retirement System used a legal exemption to avoid divesting from the blacklisted companies. The Energy Discrimination Elimination Act stipulates that government entities don’t have to abide by the law if they determine it would run counter to their “fiduciary responsibility.”

Russ has urged the retirement system’s board to address the issue again after soliciting bids from new financial firms.

Other state retirement systems have also had to grapple with the potential costs of divesting from the blacklisted firms.

The lawsuit also argues the Energy Discrimination Elimination Act violates free speech protections, is unconstitutionally vague and violates a state prohibition on “special laws.”

“Absent an injunction, pensioners like Mr. Keenan will be left to wonder, not just whether they will have retirement funds left, but on what political agenda the funds were wasted on,” the court filings state.

A GOP state senator previously said the law needs to be tweaked to ensure state entities don’t lose money as a result of divesting from companies on the restricted list.



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Carmen Forman
Carmen Forman

Carmen covers state government, politics and health care from Oklahoma City. A Norman native, she previously worked in Arizona and Virginia before she began reporting on the Oklahoma Capitol.