Oklahoma's bank boycott could cost taxpayers millions, public employee group says

Oklahoma Treasurer Todd Russ is at the center of a controversy over a boycott of large banks and asset management companies.
Oklahoma Treasurer Todd Russ is at the center of a controversy over a boycott of large banks and asset management companies.
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Oklahoma's largest public employee association says efforts by State Treasurer Todd Russ to boycott large banks and asset management companies with environmental, social and governmental policies could cost state taxpayers tens of millions of dollars and “the promise the state has made to thousands of retired public employees.”

"We have made great progress for state employees and refuse to stand idly by as Treasurer Russ diminishes our members’ hard-earned retirement funds and the promises made by the state to public sector employees in the name of political activism,” the Oklahoma Public Employees Association posted on its website.

The fight over ESG ― environmental, social and governmental policies — has grown in intensity over the past few years.

In recent years, Republicans have increased their efforts on the national level to target federal ESG policies, which they saw as an effort to push a climate change agenda at the expense of the oil and gas industry, among other companies. Those efforts have been driven by the State Financial Officers Foundation, a nonprofit based in Kansas that pushes anti-ESG legislation.

How local-level governments in Oklahoma have been impacted by bank boycotts

Since then, the controversy has filtered down to the state level.

The city of Stillwater complained in May that the state's investment firm blacklist, which barred using Bank of America for an infrastructure bond issue, would cost it more than $1 million in higher interest.

The Oklahoma Public Employees Association said Russ' anti-ESG efforts also could cause problems for state retirees.

Russ, Gov. Kevin Stitt and other state officials have ramped up criticism of financial institutions with ESG policies. Those criticisms have targeted several state pension funds, the asset management firm BlackRock and the investment bank JP Morgan/Chase.

Russ said he began shortly after taking office in January to determine which companies were attempting to “boycott energy companies” in Oklahoma.

More: Oklahoma shortens the list of banned banks. Bank of America, Wells Fargo still barred

“It is my responsibility to ensure Oklahomans’ tax dollars will not be used to enrich organizations that act counter to our taxpayers’ interests and our values," Russ said.

“Other states are taking similar steps, and Oklahoma joins them in asserting that we will not do business with financial companies who discriminate against or boycott our energy industries and businesses,” he said.

Russ said the Oklahoma Public Employees Retirement System has more than 60 percent of its $10 billion portfolio managed by BlackRock, which he said was “a well-known adversary of energy businesses.”

Stitt told the media outlet Oklahoma Watch that Oklahoma officials weren’t against companies with ESG policies if they used their own money to fund the policy. “Just don’t make that a priority with our pension funds,” the governor said. “That’s all we’re saying.”

Stitt’s criticism was echoed by State Auditor and Inspector Cindy Byrd during a speech in late September at the National Federation of Republican Women’s conference in Oklahoma City. Byrd is a member of the state pension board.

“As a financial officer of the state, I join Treasurer Russ and Gov. Stitt to push back against Oklahoma tax dollars being used to promote ESG investment,” Byrd said. “As you may know, ESG, that’s just an ambiguous acronym to promote a progressive, political ideology that can never be passed into law.”

Byrd said banks such as JP Morgan/Chase and investment firms like BlackRock were promoting ESG policies. She said those policies include banning fossil fuels, infringing on Second Amendment rights and mandatory diversity training on “ever-changing and confusing gender and race ideologies.”

“It’s political manipulation with our tax dollars,” Byrd said. "Oklahoma is an oil and gas state. We should not invest taxpayer funds with financial institutions that undermine Oklahoma’s valued resources,” she said. “Their goal is to make us money not dictate our policies.”

BlackRock, which manages more than half of Oklahoma's retirement funds, responds to criticism

The Oklahoma Public Employees Association countered that divesting the pension system from BlackRock would cost the state about $10 million “with the potential for even greater losses.”

“This led the OPERS Board of Trustees … to rightly apply a fiduciary exemption to ensure pensioners and Oklahoma taxpayers did not incur substantial costs or lower returns,” the Oklahoma Public Employees Association wrote. “After reviewing the facts, the OPERS board unanimously voted in favor of the fiduciary exemption ― with the sole exception of Treasurer Russ.”

That action, unless reversed in a later vote, allows BlackRock to stay on board.

Russ, the employees association said, appears to be motivated by outside voices. “Why else would he be so rigid in these attacks that will ultimately hurt the citizens of Oklahoma?”

An official from BlackRock, the asset management company, said the company does not boycott oil and gas companies but, in fact, invests in them. BlackRock's Senior Managing Director and Vice Chairman Mark McCombe said the company has over $15 billion invested in Oklahoma public energy companies and that 90 percent of that investment is "traditional energies like oil and gas."

"We have also made investments on behalf of our clients in private energy companies globally and in Oklahoma, including an investment in Glass Mountain, the largest private crude oil pipeline system in the Anadarko Basin," McCombe wrote in a March 31 letter to Russ. "We invested $600 million in the 280-mile Oklahoma-based pipeline system in 2017 and subsequently invested another $600 million to expand it to 710 miles."

BlackRock would not have been entrusted to manage more assets than any other company, McCombe said, if it placed social or political considerations above its clients' financial interests.

Oklahoma is one of at least 20 states that have enacted anti-ESG laws.

This article originally appeared on Oklahoman: How Oklahoma bank boycott impacts taxpayers, public employees