The constitutional challenge of Oklahoma’s Energy Discrimination Elimination Act, the law targeting companies and their ESG policies discriminating against oil and gas, prompted some legislators to propose changes.
The challenge, now in the hands of the Oklahoma Supreme Court, also led to a fight between Treasurer Todd Russ and Attorney General Gentner Drummond. Senate Bill 714 was written to end the fight and it has the backing of Tusa Sen. Dave Rader who recently penned an op-ed piece explaining and detailing his support.
Let’s get the state’s pension investments back on track
By Oklahoma Sen. Dave Rader, R-Tulsa
The oil and gas industries are dear to Oklahomans, and that’s why lawmakers passed the Energy Discrimination Elimination Act (EDEA) in 2022. It was passed to prevent the state’s financial advisers from steering investments based on environmental, social, and governance (ESG) factors — boycotting energy stocks, for example — instead of investing solely for returns and fiduciary reasons.
Oklahomans know well that oil and gas are good investments, whatever your political preference might be. But efforts like ours to hold the line have generated court fights across the country.
Last year, Oklahoma Judge Sheila Stinson ruled the law violates a state constitutional requirement that state pensions operate for the exclusive purpose of proving for benefits. The state has appealed her decision.
In the wake of Stinson’s ruling, our State Treasurer and Attorney General disagreed about which of their offices should have enforcement authority. That is currently in the treasury, but the AG has argued it should be the responsibility of the state’s top lawyer.
That’s why Senate Bill 714 was introduced with Speaker Pro Tem Anthony Moore, an oil and gas attorney from Clinton and a fellow Republican. It’s an attempt to untangle this legal knot and put enforcement where it belongs – in the hands of the state attorney general.
We’re both conservatives. We’re both involved day-to-day in the energy business and know its place at the center of our Oklahoma economy. We’d like nothing more than to hire unbiased experts to make the best financial decisions about public finance and public pensions.
In fact, Oklahoma has won in the marketplace even while we were hitting obstacles in court. The biggest investment firms in the country are retreating from their earlier support of promoting ESG considerations in their decisions. They have abandoned their memberships in Net Zero Asset Managers, and have curtailed their involvement in Climate Action 100 Plus.
Meanwhile, studies here and in other states have found that anti-ESG laws, however well-intentioned, can be expensive for taxpayers and can cut into pension earnings critical for current and future retirees.
The original law, according to a study done for the Oklahoma Rural Association, was costing taxpayers an estimated $11 million a month. The city of Stillwater even dropped plans for an important water project because the law’s boycott of many financial firms resulted in higher interest rates that put the cost of the project out of reach. This highlights how we need to ensure the right person is in charge of the law and its enforcement.
Beyond that, we need to ensure we’re going after the right companies in our pursuit against ESG. Recent news has shown that it’s less asset managers – which were the main entities on the boycott list – but rather proxy advisors that are pushing for ESG inclusion.
A report completed by ShareAction, a leftist shareholder advocacy group, was upset and noted that the “asset management industry is still largely failing to use its voting power to drive better social and environmental performance from listed companies.” Oppositely, the two major proxy advisory firms, Institutional Shareholder Services (ISS) and Glass Lewis, maintained similar support for environmental and social shareholder resolutions while State Street, BlackRock, and Vanguard – the “Big Three” – decreased support.
And unlike asset managers, proxy advisors don’t have a legal fiduciary duty to their clients or to investors. They are not solely focused on returns, as asset managers are, and therefore push other factors such as social and environmental policy within companies. This makes them significantly more problematic. To truly win the ESG war, we need to turn to proxy advisors.
I am confident legislators can resolve this issue and overcome these costly legal battles and delays in our attempt to tackle ESG. Now is the perfect time to adjust our focus and move forward in our pursuit to get our state investments back on track.
Dave Rader, a former energy-industry engineer and a former college football coach, has represented Tulsa in the Oklahoma Senate since 2016, and currently serves as chair of the Senate Republican Caucus.