Treasurer Russ says federal judge’s ESG ruling shows an Oklahoma County judge was wrong

While Oklahoma’s anti-ESG law is on hold because of a district judge’s ruling, State Treasurer Todd Russ says a recent federal judge’s ruling in Texas against ESG policies of American Airlines and BlackRock shows he was right to enforce the Oklahoma law.

It was last year when Russ was ordered to suspend his enforcement of the Energy Discrimination Elimination Act and the Restricted Financial Company List of 2022 following a 2023 lawsuit by a state pensioner This month, U.S. District Judge Reed O’Connor in Texas ruled American Airlines violated federal law by basing its investment decisions for the company’s employee retirement plan on environmental, social and other non-financial factors.

As Reuters reported, O’Connor said American had breached its legal duty to make investment decisions based solely on the financial interests of 401(k) plan beneficiaries by allowing BlackRock, its asset manager and a major shareholder, to focus on environmental, social and corporate governance (ESG) factors.

Treasurer Russ said the decision “delivers a resounding validation of Oklahoma’s efforts to protect financial integrity and prioritize fiduciary responsibility.” He went on to react by saying the federal judge’s ruling highlights how ESG policies, when prioritized over financial returns, constitute a breach of fiduciary duty.

“The legislature saw the writing on the wall—this breach of duty—and took action,” said State Treasurer Todd Russ. “I picked up the mantle and made it clear: Oklahoma’s tax dollars and pension funds will not support companies undermining their fiduciary responsibilities. This court decision confirms what we’ve said all along—it’s dangerous, it’s a breach, and it’s exactly what we’ve been fighting against.”

The judge in the U.S. District Court case, Spence v. American Airlines, specifically noted that considering Environmental, Social, and Governance (ESG) factors in fiduciary decisions was central to the breach of duty under ERISA. The court found that:

  • American Airlines’ Employee Benefit Committee (EBC) allowed ESG considerations—particularly BlackRock’s ESG-driven proxy voting and activism—to influence decisions about the 401(k) plan.
  • This focus on ESG goals came at the expense of maximizing financial returns for the plan’s participants, violating the fiduciary duty of loyalty.
  • The court stated that considering ESG factors improperly shifted the focus from financial performance to socio-political outcomes, which is not permissible under fiduciary law.

In its opinion, the court highlighted BlackRock’s blind commitment to ESG initiatives and noted that this activism conflicted with the financial interests of plan participants, citing proxy votes and shareholder proposals at major energy companies as examples.

BlackRock was one of several firms put on a list of financial firms banned from state business.

“As Treasurer, my job is to ensure our funds are managed responsibly and with one goal in mind—ethically delivering returns for Oklahomans,” added Russ. “This ruling reinforces what I’ve said from the start: ESG activism has no place in managing state funds. It’s short-sighted, it’s reckless, and it’s a violation of trust.”

The Oklahoma County District Judge’s issuance of a permanent injunction was appealed in December 2024 by Attorney General Gentner Drummond.