Oklahoma Watch | Paul Monies
The board that oversees investments for the state’s $2.2 billion tobacco settlement fund will now take into account so-called Oklahoma values and anti-ESG policies when deciding on investments, hiring asset managers and voting on shareholder resolutions.
The Board of Investors for the Tobacco Settlement and Endowment Trust approved the changes Wednesday, fulfilling a years-long objective of Oklahoma Treasurer Todd Russ to align the trust fund with policy objectives pushed by anti-ESG conservative nonprofits like the State Financial Officers Foundation, the Heritage Foundation and the 1792 Exchange.
Oklahoma’s anti-ESG law, adopted by the legislature in 2022 and known as the Energy Discrimination Elimination Act, was put on hold by an Oklahoma County District Judge in a ruling that stemmed from a legal challenge of the law. The case remains before the state Supreme Court. The Act was created when legislators expressed concerns of discrimination against the oil and gas industry by corporations which adopted ESG policies.
TSET Board member John Waldo voted against the changes to the investment policy statement, which passed by a 3-1 vote. Waldo is an appointee of State Auditor and Inspector Cindy Byrd.
The TSET investment policy now incorporates a state proxy voting guideline developed by Bowyer Research, an independent proxy advice firm. Jerry Bowyer, appearing by video link, said Oklahoma is the first state to adopt those guidelines. Bowyer said a review of past proxy votes of TSET stock holdings showed some of its asset managers voting against the economic values of the state.
“They are not the boss,” Bowyer said. “You’re the shareholder; you’re the boss. Companies easily forget that. You have to make sure your own money is not weaponized against your fund or against the industrial, economic interest of the state.”
Russ said the investment policy changes were in line with recent executive orders and reinforced the importance of the oil and gas and agriculture industries to the state’s economy. He said the proxy voting guidelines would give the state more flexibility when voting on shareholder resolutions for its investments in publicly traded companies. Russ previously criticized what he called a duopoly of proxy advisory firms that advise pension funds and state endowment funds like TSET.
“We’re trying to get standards that look like ours and not ISS or Glass Lewis,” Russ said after the meeting.
In light of criticism, ISS and Glass Lewis in January revised their proxy voting policies for 2026. They included no longer automatically recommending a vote for shareholder resolutions encouraging diversity in board of directors composition.
The TSET investment policy revision formalized changes requested by Russ to the trust’s investment consultant, Innovest, which last year developed the Oklahoma Values Alignment Assessment.
The Oklahoma values assessment draws heavily on scores developed by the conservative 1792 Exchange, which mirrors corporate scorecards developed by groups such as the Human Rights Campaign that advocates for LGBTQ+ equality and inclusion. The values assessment also downgraded firms if they had signed on to a United Nations-backed effort called the Principles for Responsible Investing.
Last week, the Oklahoma State Pension Commission, which Russ also chairs, voted to ask state pension systems to evaluate proxy voting by their asset managers following an executive order by President Trump in December. The state pension commission’s attorney had to remind Russ several times that federal executive orders weren’t binding on state pension systems, which have their own boards with a fiduciary duty to their members.
The 1792 Exchange did the proxy voting report for the State Pension Commission. The nonprofit grades companies and their boards based on whether it thinks the policies go beyond typical financial metrics. Its Corporate Bias Ratings database has more than two dozen companies based in Oklahoma.
“The 1792 Exchange encourages Oklahoma to publish its proxy voting records instead of keeping its pensioners in the dark about how the state votes on ESG issues with their money,” said the report provided to the State Pension Commission.
House Speaker Kyle Hilbert, R-Bristow, has a pair of bills, House Bill 4428 and HB 4429, that deal with proxy voting by state pension systems. Both passed the first of two House committee votes. Russ said Wednesday he had not requested the bills, nor had he talked to the speaker about them.
The focus on shareholder resolutions and proxy votes is the latest battleground for corporate values and the fight over environmental, social and governance issues. The Oklahoma Energy Discrimination Elimination Act remains on hold pending a review by the Oklahoma Supreme Court.
Oklahoma lawmakers passed HB 2034 in 2022. Modeled after a Texas law, it directed the state treasurer to establish a list of banks and financial institutions perceived to be boycotting the oil and gas industry with their carbon-emissions reduction goals.
Russ issued three versions of the financial-firm blacklist, targeting companies like Bank of America, State Street Corp., BlackRock Inc. and Barclays PLC. The state’s largest pension system took an exemption to the law, as did Russ’ office, which managed purchase cards issued by Bank of America. After a legal challenge by a state retiree, an Oklahoma County district judge put the law under a permanent injunction in September 2024.
A federal judge in Texas this month struck down the Texas version of the anti-ESG blacklist law, calling it overbroad and a violation of First Amendment free-speech rights. Texas said it would appeal the verdict.