Oklahoma State Treasurer Todd Russ is expected to issue a revised list of financial institutions accused of boycotting the energy industry by the end of the month, according to state pension fund directors. And the state will likely grant exceptions for pension systems using companies accused of boycotting the fossil fuel industry, pension fund directors were told during a closed-door meeting at the Oklahoma Capitol on Tuesday.

Russ summoned the leaders of Oklahoma’s state pension funds to discuss implementation of the state’s Energy Discrimination Elimination Act. Oklahoma enacted the law in 2022 to crack-down on Environment, Social, and Governance investing. The practice screens investments for ethical considerations including environmental degradation and corporate leadership. 

State pension fund directors and legal experts have already said they are concerned that millions of dollars in state retirement funds could be lost because of the law’s requirements. 

Oklahoma is one of at least seven states to ban business with financial institutions that allegedly “boycott” the fossil fuel industry. Critics say these practices unfairly punish the fossil fuel industry, which contributes to man-made climate change through the release of carbon dioxide into the atmosphere, heating the earth, ocean and atmosphere.

At the beginning of the meeting, Russ said the meeting was not public. No agenda was posted and no meeting notice filed with the Secretary of State’s Office. Russ asked that all attorneys and journalists leave the meeting room.

“First of all, how many attorneys are in the room? How many practicing attorneys are here representing someone,” Russ asked.

Marc Edwards, who serves as general counsel for three Oklahoma pension funds that serve police officers, firefighters and other law enforcement in the state, was present and raised his hand.

Edwards told Russ he was present on behalf of Duane Michael, executive director of the Oklahoma Law Enforcement Retirement System, who could not attend Tuesday’s meeting. Russ again asked him to leave.

“I hate to tell you, but you’ve got to leave,” Russ said, adding “this is not a public meeting.”

Jordan Harvey, Russ’s chief of staff, said the meeting was only for leaders of state pension systems to help implement the new law. State pension fund heads told The Frontier in May they had reached out to the treasurer’s office for guidance on implementing the law, but received little to no feedback.

“You guys have indicated you would like some direction,” Russ said. “I’m here to help. But we have to have some kind of rules for engagement and guidelines to go by.”

Some of those present pushed back, telling Russ it was important for attorneys to be present since there are many legal issues involved in implementing the law. Russ responded that the attorneys will eventually be brought in to the discussion at a future meeting, but wanted this gathering to be held out of public view so everyone involved could speak candidly.

“We want candid, interactive collaboration,” Russ told the group before asking a Frontier reporter to also leave the room. “We don’t want attorneys who can pick up parts or misquote or anything. Rule number-one was no attorneys in the room.”

Russ said implementing the requirements of the law was new ground for him as well, and many of the state pension system heads have been asking for direction in how to implement the new law.

“We’re just just trying to walk through this together,” Russ said. “I’m trying to collaborate with you guys to help us all be successful as best we can. Based on how this turns out in our discussions, and questions and answers and information that we can provide. It may be clear enough that you guys know what your path is.”

Russ later told The Frontier that the meeting was just to go over how those pension systems could implement the provisions of the Energy Discrimination Elimination Act, and that there will likely be some exceptions allowed once the new list is published.

“They just want to be on the same page, to execute the law and understand how to do that and protect the investors and the taxpayers of Oklahoma and still comply with the law,” Russ said. “I think it’s clear, I think there’ll be some exceptions that we’ll have to make and I think there’s some areas that will be much easier for them to transition to new money managers without causing any loss in the pension portfolios.”

In other states, similar blacklists have been blamed for higher government borrowing costs, and some public pension systems have warned that their retirees could lose tens of millions of dollars each year. Oklahoma pension fund directors have similar worries — that the state’s retirement systems could lose millions if they are forced to pull their money from blacklisted investment managers and end contracts for services with blacklisted banks and other financial firms.

Nearly all of the language in Oklahoma’s Energy Discrimination Act is copied directly from Texas’s law, which was passed in June 2021 and later picked up by the American Legislative Exchange Council, an organization that provides model legislation mostly to conservative state lawmakers to introduce in their legislatures though it was ultimately not adopted by the group’s task forces.

The law requires that state pension systems divest funds invested through firms found to be boycotting the fossil fuel industry — with some exemptions, such as cases where divesting or ending a contract would breach the pension system’s fiduciary duty to pensioners. The law also prohibits any state or local government entity from contracting with firms that end up on the state’s blacklist of boycotting firms.

The Oklahoma State Treasurer also currently uses blacklisted bank JPMorgan Chase & Co. to issue most of the state’s financial disbursements, such as employee payroll and retirement checks. Bank of America, also on the blacklist, contracts with the state for its state debit card system. After Tuesday’s meeting, Russ said no decision has yet been made on whether he will end those relationships with the blacklisted firms.

Early this year, Russ sent questionnaires to numerous investment firms and banks the state’s pension systems do business with asking whether they boycott the fossil fuel industry, as well as questions on specific energy company shareholder votes, environmental group membership.  

Though none of the companies surveyed by Russ said they were  boycotting the fossil fuel industry, Russ presented a list of 13 companies he said were doing so in May, despite some of those companies not qualifying under the law to be placed on the list.

Those companies have 90 days after being notified they are on the blacklist to submit appeals to Russ’s office showing that they have ended their alleged boycotts in order to be taken off the list. For nearly all of the firms on the first list, that deadline comes on Aug. 3.

During the meeting, Russ said he will probably issue a revised list of companies by the end of August, said Chase Rankin, executive director for the Oklahoma Firefighters Pension and Retirement System. That means the firefighters pension will likely take the issue up in September, once the new list is out, he said.

The Firefighters Pension and Retirement System has around $18 million in direct holdings through blacklisted companies, and contracts with the blacklisted State Street Bank for its banking services.

Rankin said it has been more than a decade since the system has requested proposals, and so putting out a request for proposals now is probably prudent, though if State Street does come back with the best offer, the pension system could sign a new contract with the company.

Rankin said he asked during the meeting about exemption reporting — the state pension funds are required to submit a report to the treasurer if they determine it would be a breach of fiduciary duty to divest or end a contract with a blacklisted company. Rankin said he asked what the treasurer wanted in the report.

“I didn’t honestly didn’t get a good answer from that, but I think that I think that there may be some scenarios, and he’s anticipating some scenarios, where the funds may have some exceptions,” Rankin said.

Rankin also said several pension fund directors made clear to the treasurer that he does not have the power to enforce the law. That responsibility, he said, is with the state Attorney General’s Office.

“I think ultimately the Attorney General is going to have to issue some kind of opinion at some point,” Rankin said.