Oklahoma Treasurer Todd Russ has cut the state’s restricted financial company list by half as his office continues to police banking and pension policies alleged to be hostile to the state’s energy industry. 

The narrowing of the restricted companies list comes as some of the state’s seven pension systems appear ready to exercise an exemption in the law so they won’t have to divest assets from banks placed on the list. That’s based on letters and emails to the treasurer obtained under the state’s Open Records Act. Any final decisions would be made by trustees of the pension systems. 

Thirteen large banks and financial firms were placed on the first version of the restricted companies list Russ released in May. Just six companies remain on the list: BlackRock Inc., Wells Fargo & Co., JP Morgan Chase and Co., Bank of America, State Street Corp. and Climate First Bank. 

Oklahoma’s pension funds are grappling with implementing the policies from House Bill 2034, the Energy Discrimination Elimination Act. Lawmakers passed the law in 2022 as part of a multistate effort by some conservative policy groups to target what they perceive to be out-of-control climate change policies put in place by large banks and financial firms. They claim such policies discriminate against oil and gas interests, which are major contributors to the state’s economy and tax base. 

Russ, who took office in January and voted for the bill as a state representative, held a closed-door meeting this month with pension system representatives to talk about implementation. His office has been aided by the State Financial Officers Foundation, a Kansas-based nonprofit that has provided talking points and publicity for dozens of Republican state treasurers whose states have passed similar laws to Oklahoma. 

The Latest

Afghan Refugee Resettlement Highlights Inequities for All Vulnerable Oklahomans

Hosted by Sen. Carri Hicks, D-Oklahoma City, and members of the Senate Veterans and Military Affairs Committee, the study revealed how existing inequities in Oklahoma related to housing, employment and means of accessing government assistance programs exacerbated the challenges of resettling Afghans when they began arriving in September 2021.

Letters and emails between the treasurer’s office and pension officials show the confusion and concerns over implementation of the law. Cities and counties have also struggled with the uncertainty of how they might be covered under the law. A section of the law for political subdivisions forbids contracts more than $100,000 with financial firms that boycott energy companies.  

“The treasurer’s inclusion of certain companies on the list of Restricted Financial Companies is arbitrary,” Ginger Sigler, executive director of the Oklahoma Police Pension and Retirement System, wrote in a June 1 letter. “The underlying basis for placement on the list has not been disclosed.” 

Sigler said the police pension system investments with restricted companies are for financial reasons, not policy ones. 

“All of these financial companies have been retained by the state’s pension systems for pecuniary reasons to make profit for the exclusive benefit of members and beneficiaries, not to penalize fossil fuel-based energy companies, or even promote an ESG (environmental social and governance) agenda,” Sigler wrote.  

In an interview Thursday, Sigler said the police pension system has investments with just one company on the updated list, a real estate trust fund managed by JP Morgan Chase. Sigler said an investment advisor brought in by Russ’s office said that type of investment wasn’t covered by the law. 

Jordan Harvey, Russ’s chief of staff, said the treasurer’s closed-door meeting on Aug. 1 was meant to be an informal venue to air concerns and ask questions. Other participants in the meeting describe the atmosphere as tense after pension fund attorneys and a reporter for The Frontier were asked to leave. 

“We were trying to go above and beyond and provide an open space for all of the pension systems to hear the same information at the same time and for them to ask their questions,” Harvey said. “The attorneys weren’t invited at that time because this was not supposed to be a formal, interpretive session.” 

Harvey said the seven banks and financial firms removed from the treasurer’s restricted company list were either not publicly traded or had failed to respond to the office’s initial questionnaire earlier this year. Non-responses were presumed to be boycotting the energy industry until the treasurer’s office heard otherwise. 

The Oklahoma Public Employees Retirement System has the biggest exposure to banks on the restricted companies list. About two-thirds of the system’s assets, or almost $7 billion, are managed by BlackRock or JP Morgan Chase. Trustees have yet to act on a recommendation by the system’s investment committee to exercise a fiduciary duty exemption in the law. In the meantime, the system has issued requests for proposals for other investment managers if divestment is required. The next board meeting is scheduled for Aug. 23. 

The Oklahoma Firefighters Pension and Retirement Board may have to find a new custodian bank for its $3.5 billion system after State Street remains on the treasurer’s updated list. Custodian banks provide a wide range of services for pension systems, including moving money around from a system’s various investments and portfolios. State Street has been the system’s custodian banker for more than 40 years.  

Chase Rankin, executive director of the firefighters system, said the pension system issued requests for proposals for a new custodian bank. But the number of financial institutions who provide those services is limited. Two of the four firms are on the treasurer’s restricted list: State Street and JP Morgan. Northern Trust and Bank of New York are the other two. But only State Street and Northern Trust responded to the firefighters system request for proposal. 

“We’re going to evaluate the cost to transition, but primarily we’re going to make a business decision at the end of the day,” Rankin said Friday after the system’s monthly board meeting. “If the business side of this says it’s not good to move from State Street, then we’ll seek an exception for that.” 

Rankin, who said he’s had productive conversations with Russ about implementation, said he worries that Northern Trust might end up on future versions of the treasurer’s restricted company list.

“If I make this change, it’s going to be a permanent change,” he said. “This is something where you cannot change your custodian bank very often.”  

Meanwhile, J.D. Strong, director of the Oklahoma Department of Wildlife Conservation, said the agency’s pension fund could lose an estimated $234,000 if it had to divest from its holdings invested with BlackRock. The pension fund, the state’s smallest, has about $130 million in assets. 

“The ODWC is a non-appropriated agency,” Strong wrote in a June 1 letter. “Losses of this nature to our pension funds would affect our unfunded pension liability and cannot be made up with appropriated monies.” 

The Wildlife Department asked the treasurer if it could take an exemption to the law, but it did not receive a response. Its eight-member commission has not yet voted on any possible exemptions, said Amanda Storck, the department’s chief financial officer. 

Oklahoma’s two largest trust funds, run by the Commissioners of the Land Office and the Tobacco Settlement Endowment Trust, are not covered by the Energy Discrimination Elimination Act. Combined, those trust funds have more than $4.1 billion in assets, with the investment earnings going toward state education and health programs. 

Despite that, land office commissioners voted in June to stop using BlackRock and JP Morgan Chase as investment managers. The Tobacco Settlement Endowment Trust, known as TSET, has an investment contract with State Street that was already in place when the law took effect, according to an email from an assistant attorney general to the treasurers’ office. Russ chairs TSET’s investment board.

“My recommendation would be to leave the TSET/State Street contract alone at this time,” the attorney, Benjamin Graves, said in a June 8 email to Harvey, Russ’s chief of staff. “The BOI (board of investment) does not have statutory authority to divest from State Street under the EDEA, and doing so would open up the BOI to potential liability.”

Paul Monies has been a reporter with Oklahoma Watch since 2017 and covers state agencies and public health. Contact him at (571) 319-3289 or pmonies@oklahomawatch.org. Follow him on Twitter @pmonies. 

Support our publication

Every day we strive to produce journalism that matters — stories that strengthen accountability and transparency, provide value and resonate with readers like you.

This work is essential to a better-informed community and a healthy democracy. But it isn’t possible without your support.

Creative Commons License

Republish our articles for free, online or in print, under a Creative Commons license.