More than half of the 13 companies on Oklahoma’s blacklist fall outside the parameters of a  2022 state law intended to punish financial institutions that allegedly boycott the oil and gas industry, a review by The Frontier found. 

Part of the confusion comes from the language in the law — in order to be considered a “financial company” subject to landing on the blacklist, a company must be publicly traded

But seven of the 13 companies on Oklahoma’s list are not publicly traded. Other blacklisted companies, including BlackRock Inc., one of the largest financial services companies in the world that manages more than half the assets of the  Oklahoma Public Employees Retirement System, claims it does not boycott oil and gas and has invested billions into Oklahoma energy sector companies for its clients.   

In an interview with The Frontier, Oklahoma State Treasurer Todd Russ said he chose to add private firms on the list anyway because of a section in the law that requires any state or local government entity from entering into contracts with any company that doesn’t certify they aren’t boycotting the oil and gas industry.

The Frontier found that the Oklahoma State Treasurer’s office applied criteria for blacklisting companies inconsistently, leaving some, including a few of the largest banks in the world, claiming they have been arbitrarily and wrongly banned from doing business with the state. The law could also have other far-reaching effects on everything from financing for public works projects to how state payroll checks are processed.

Oklahoma’s financial services blacklist
BlackRock Inc.
Firstmark Fund Partners
Wells Fargo & Co.
JPMorgan Chase & Co.
Bank of America
State Street Corp.
Grosvenor Capital Management
Lexington Partners
Stepstone VC Global Partners
WCM Investment Management
William Blair
Climate First Bank

Absent any specific criteria in the law, Russ said he made some decisions based on how investment firms voted on behalf of their clients at energy company shareholder meetings. He said he believes some votes on environmental matters have been against shareholders’ and companies’ best interests.

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.

Though the state’s Energy Discrimination Elimination Act deals mostly with public pension funds, one section of the law prohibits any government entity from entering into contracts with blacklisted firms, but provides exceptions if doing so would violate an agency’s financial or legal obligations or if a company provides exclusive services. 

The Oklahoma State Treasurer 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. 

Russ said that his office was in regular discussions with JPMorgan Chase and Bank of America, but did not rule out ending the state’s relationship with the companies. 

“We will end the relationships that don’t fit that we can. As far as the timing, it allows up to a year to make that transition. We’re having those conversations now on what that’s going to look like,” Russ said. “We’ll use whatever discretion necessary to make those kinds of decisions when we get to those points.”

Carly Atchison, spokeswoman for Gov. Kevin Stitt, said finding other companies to handle those services would not be an issue and the state could use a competitive bidding process to find the best deals for the state.

“There are plenty of other companies, not just the big brand names like Bank of America, who don’t discriminate against our major assets and can handle payroll and would love to do business with the state of Oklahoma,” Atchison said. 

The effects are already being seen outside the state’s pension systems.

On May 5, Wells Fargo resigned as the lead underwriter for the Oklahoma Turnpike Authority’s proposed $500 million bond sale for its turnpike expansion projects in response to being put on the restricted list, and some municipalities in Oklahoma say they are seeing higher interest rates for bonds as a result of the move.

Russ characterized  Wells Fargo’s exit as an example of the company “punishing states that are energy-producing states.”

Law creates confusion for state retirement fund managers 

State retirement fund directors say their concerns and requests for guidance from the State Treasurer’s office have been ignored.

One state retirement fund director said the system also faces possible financial penalties if it divests assets from blacklisted firms. Treasury office staff said the agency has not performed an analysis on financial penalties state pension systems will face if they divest or what effects the list will have on government bond underwriting.

The heads of two of the state’s retirement systems said they have reached out to Russ’ office numerous times with questions, but got few answers.

“We can’t talk to Treasurer Russ. He won’t respond to us. He will have somebody from his office send you a very generic email,” said Ginger Sigler, executive director of the Oklahoma Police Pension and Retirement System, during the retirement system’s board meeting May 17.

“It would be nice if we could talk to the treasurer and he could tell us what the statutes mean,” she said during the meeting. “He won’t talk to us.”

The lack of communication and dearth of clear criteria for how the 13 companies landed on the list has left some legal experts scratching their heads.

“We’re not quite sure the underlying basis is for why they were placed on the list,” said Marc Edwards, general counsel for three Oklahoma pension funds that serve police officers, firefighters and other law enforcement in the state. “So we’re not quite sure how the managers can cease boycotting when it’s not entirely clear why they’re on the list.”

Joe Fox, executive director for the Oklahoma Public Employees Retirement System, said he too had reached out to the treasurer’s office seeking guidance but had gotten no substantial response. Fox, who attended the Police Pension & Retirement System’s most recent meeting, declined to give details about what types of penalties or problems OPERS could face if forced to divest from blacklisted companies. He said he wanted to first discuss the issue at the next OPERS board meeting on June 1.

BlackRock, which is publicly traded, manages about 60% of the Oklahoma Public Employees Retirement System, or around $5.9 billion. The retirement system serves more than 80,000 active and retired state employees and their beneficiaries. 

In a statement, BlackRock said that it invests over $15 billion in Oklahoma public energy companies on behalf of its clients and $320 billion in public energy companies globally along with investments in renewable energy. BlackRock claims the blacklist is only hurting retirees.

“Boycott lists raise costs for Oklahoma taxpayers and reduce returns for firefighters, teachers, and state employees seeking to retire with dignity,” the statement said. 

Russ said that he has reached out to the state pension fund heads and is scheduled to meet with some of them in the coming weeks.

“My door is wide open,” Russ said. “If they’re wanting to send me their busywork and have 25 international money managers come and sit down at my desk in my office, that’s not my role. That’s their role, to deal with their money managers.”

In an interview with The Frontier, Sigler said the police retirement and pension system would likely face significant penalties if it were to divest, though she was unsure how much those penalties would cost retirees. The $3-billion pension system was already in the process of divesting from some of the companies on the list when the law was passed, including $486,000 it has invested through the banned firm Grosvenor Capital Management. 

While the police pension system has around $105 million invested with blacklisted firm JPMorgan Chase, the assets are part of the company’s real estate fund, which by default does not invest in the oil and gas industry.

Oil and gas states move to punish ‘woke’ investing 

Oklahoma is one of at least seven states to ban business with financial institutions that practice  

Environment, Social, and Governance investing. The practice screens investments for ethical considerations including environmental degradation and corporate leadership. 

Critics say these practices unfairly punish the oil and gas industry. Conservative politicians have grafted ESG investment policies onto the country’s broader culture war and social unrest, and have likened the investment guidelines to “woke” ideology.

The fossil fuel industry, which has heavily funded efforts for decades to cast doubt on man made climate change, is an economic and political juggernaut in Oklahoma and other states with blacklists. Around 8.6% of all workers in Oklahoma work in the oil and natural gas industry, and much of the state’s budget comes through a gross production tax on oil and gas, as well as an estimated overall economic impact of $64.9 billion to the state in 2022, according to the Oklahoma Energy Resources Board. In 2021, Oklahoma was the fifth largest producer of natural gas in the nation and sixth largest oil producer. The industry also contributes mightily to state and federal politicians both on and off the books, as well as helping fund numerous charitable and community organizations throughout the state.

When Oklahoma’s blacklist of financial companies was announced May 3, several of the state’s political leaders crowed about the law’s support of the fossil fuel industry.

“I’m the governor of Oklahoma. I’m going to protect our oil and gas industry,” Stitt said on Fox News Business shortly after the blacklist was announced. “I’m going to protect an all-of-the-above approach in our state. Then our pension funds, some of these investment houses are using our pension funds to push their political agenda. We’re simply not going to let that happen in the state of Oklahoma.”

Adrian Beverage, president and CEO of the Oklahoma Bankers Association, recently issued a public statement condemning anti-ESG policies. 

 “While these bills provide elected officials a short-term political victory, they are also giving their constituents a loss that will cost them dearly for years to come,” he said. 

Nearly all of the language in Oklahoma’s Energy Discrimination Act is copied directly from Texas’s law, which was passed in June 2021. The language was introduced as draft model legislation later in 2021 at the American Legislative Exchange Council, a corporate bill mill that provides model legislation mostly to conservative state legislators, for lawmakers to introduce in their states, though it was ultimately not adopted by the group’s task forces.

Some blacklisted companies say they don’t boycott oil and gas 

Several blacklisted firms deny they are boycotting the energy industry at all.

The nation’s largest bank, JPMorgan Chase, called its inclusion on Oklahoma’s blacklist “baseless,” in a statement to The Frontier and said that it provided over $2 billion in financing and other services to 40 companies in Oklahoma’s oil and gas sector between 2021 and 2022.

None of the 129 companies that responded to a survey from the state treasurer’s office asking for information on their investment practices reported they were boycotting fossil fuel, a review of the responses by The Frontier found. Some companies, including many that were not blacklisted, reported that they weighed ESG factors among other considerations before making investment decisions. 

Jordan Harvey, Russ’s chief of staff, said Oklahoma’s survey was developed using other states’ questionnaires, as well as energy company shareholder votes that investment firms participated in and actions the firms took part in through climate change-focused organizations, such as the Net Zero Asset Managers Initiative.

The treasurer’s office did not have a scoring system for answers to evaluate whether firms were actively undermining the state’s oil and gas industry, Harvey said.

Some firms with remarkably similar responses to those of blacklisted companies were not banned, raising questions about the state’s consistency, The Frontier’s analysis found.

State Street Corp. and Northern Trust Co., both publicly traded companies, had nearly identical responses to the survey. Northern Trust, which has a corporate goal of zero carbon dioxide emissions by 2050 did not end up on the blacklist, but State Street did. Northern Trust is the master custodian of advisors for the Oklahoma Public Employees Retirement System. The retirement system also has a $39 million cash account with Northern Trust. 

State Street, a Boston-based financial services and banking company, said in a statement that it  hoped to work with state leaders to clear the issue up.

“We strongly disagree with the Oklahoma State Treasurer’s analysis. State Street does not discriminate against oil and gas companies, or any other industry sectors,” the statement said. 

Russ said he decided to make decisions about what investment firms to include on the blacklist based on how they voted shares in energy stocks on behalf of their clients. These actions are sometimes called proxy votes. He said he wanted to ensure Oklahoma retirees’ money was not being used to undermine the oil and gas industry.

“So they’re using my money, and they get to vote and control the outcomes by using my money,” Russ said. “Are you voting those proxies for these companies in a manner that looks like Oklahoma values, that supports energy and supports oil and gas? Or are you pressuring them and using shareholder resolutions to manipulate that process, to tell them that we’re going to actually take this and invest it in people that don’t believe in oil and gas and energy states?”

Russ said he would consider removing companies from the blacklist if they disavowed the United Nations’ Paris Agreement, which he characterized as having a mission “to put the energy industry out of business by 2050,” he said. 

At least nine other companies that responded to Russ’s letter but did not end up on the state’s blacklist also said they do not fit the definition of a “financial company” under the Energy Discrimination Act because they are not publicly traded. Seven of those companies did not complete the questionnaire.

In response to Oklahoma’s request for information on its investment practices, Lexington Partners, a privately-held New York financial firm that manages about $55 billion in assets, said it doesn’t qualify for the blacklist since it is not a publicly traded company. Yet it still ended up there.

Russ said he chose to put non-public companies on the list because of a section in the law that requires any state or local government entity, including state retirement systems, from entering into contracts with some companies that don’t certify they are not boycotting the energy industry.

The Energy Discrimination Elimination Act also states that financial companies that do not respond to a request for information from the State Treasurer’s office within 60 days  are assumed to be boycotting the oil and gas industry.

Seven companies that responded after the deadline or did not respond at all were put on the blacklist. But at least one other company that did not respond, Price-Edwards & Co. was not blacklisted, and one that responded late, Axiom Investors, was also not put on the blacklist, the records show.

Chase Rankin, executive director of the Oklahoma Firefighter Pension and Retirement System, said the system has about $18 million in direct holdings through blacklisted companies.

The state’s pension systems have until June 2 to respond to the State Treasurer’s office and notify the blacklisted financial companies. After that, the companies have until Aug. 3 to demonstrate they have ceased their alleged boycotts.

“Once the deadline passes … then we would have to make a decision about whether or not asking our managers to sell our position in these financial companies would impact our portfolio in such a way that would breach our fiduciary duties,” Rankin said. 

The police pension system board voted on May 17 to send a letter to the State Treasurer’s office stating that it has no assets eligible for divestment because many of the blacklisted companies are not publicly traded and other various exemptions in the law. 

Correction: An earlier version of this story misidentified Adrian Beverage, president and CEO of the Oklahoma Bankers Association.