OKLAHOMA CITY — The law that requires the State Treasurer to blacklist financial institutions that are perceived to be “boycotting” the energy industry could cost state retirement systems $10 million or more.
House Bill 2034, the Energy Discrimination Elimination Act of 2022, directs the Treasurer to maintain a list of financial institutions that allegedly ‘boycott’ oil and gas companies.
BlackRock and State Street Global Advisors are among the six institutions singled out by State Treasurer Todd Russ.
BlackRock is considered the world’s largest asset manager, with $8.6 trillion in assets under management as of Dec. 31, 2022, according to a report filed with the U.S. Securities and Exchange Commission on Feb. 24, 2023.
BlackRock and State Street account for approximately 64.7% of the Oklahoma Public Employees Retirement System’s defined-benefit plan assets, or $6.8 billion, as of May 31, said Joe Fox, OPERS’ executive director, in an email to Pensions & Investments publication.
HB 2034 requires Oklahoma public pension funds to terminate contracts with the Treasurer’s blacklisted firms unless they take a fiduciary exemption from the divestiture mandate.
OPERS’ investment committee recommended that the board take the fiduciary exemption permitted under the law. Nevertheless, the board was seeking proposals to gather more information in order to prepare for potential divestment, if necessary, Fox told Pensions & Investments last month.
The HB 2034 divestiture mandate covers both the $10.7 billion OPERS retirement system and the $366 million Uniform Retirement System for Justices and Judges.
In response to Russ’s ‘blacklist,’ BlackRock wrote that it “offers our clients the choices to help them achieve their investment objectives.” The company criticized boycott lists – such as the one mandated by HB 2034 – because they “raise costs for Oklahoma taxpayers and reduce returns for firefighters, teachers, and state employees seeking to retire with dignity.”
OPERS’ staff has estimated that “if divestment and asset transitions were to occur, the estimated explicit costs to trade the securities in the portfolios advised by companies on the list would be approximately $9.6 million for OPERS and $383,000 for the Uniform Retirement System for Judges and Justices, as of May 31, 2023,” Fox told a CNHI newspaper reporter last week.
The total loss in market value to the plans because of divestiture could potentially be several times that amount, he added.
As of June 30, 2022, OPERS had a little over 73,000 members; half of them were retirees and the others were active state employees.
A May 3 letter from the Treasurer stated fund managers had until June 2 to present a plan to divest from companies on his blacklist. Russ had 90 days to determine if their responses indicated they have done enough to be removed from his list, said Ginger Sigler, executive director of the Oklahoma Police Pension and Retirement System.
A matter of definition
“This is all about the interpretation of what you define as ‘woke,’ how statutes are defined, and this is how disconnect has happened between plans and the state Treasurer,” Sigler told CNHI.
“JPMorgan funds many oil companies in Oklahoma, but also funds environmental companies like wind and solar,” she noted.
For example, the State of Oklahoma has invested in electric vehicle manufacturer Canoo by providing more than $100 million in tax incentives to build production facilities in Pryor and Oklahoma City.
Renewable energy production employs “upward of 3,000 people” in Oklahoma, according to a report cited by Bank of America – which provided the financing for a wind farm in north-central Oklahoma that was bought by Tulsa-based electric utility Public Service Co. of Oklahoma.
“I fully understand the intentions of the State of Oklahoma with new legislation protecting the oil and gas industry,” Sigler said. However, “Our mission is to earn the best returns for our members. Just like the State of Oklahoma working with Canoo and trying to lure Panasonic, our managers invest in traditional energy companies as well as innovative energy solutions.”
BlackRock criticized from both sides
BlackRock has been criticized by both extremes: from environmental supporters complaining about its investments in conventional energy, and from energy producing states which claim BlackRock boycotts the U.S. oil and gas exploration/production industry.
Asked last October if BlackRock supports a net-zero scenario in which “no new investment is needed in coal, oil, and gas,” an asset manager responded, “No.” BlackRock’s role is “as a fiduciary to our clients – it is not to engineer a specific decarbonization outcome in the real economy,” the asset manager said.
Multiple U.S. states (Texas, Arkansas, Oklahoma, Arizona, Indiana, Louisiana, Florida, South Carolina, Missouri, and Utah) have threatened to withdraw state funds from BlackRock’s management, or have already done so, because they disapprove of its supposed ESG investment policies.
BlackRock an investor in ONEOK, ONE Gas
BlackRock is a major investor in at least one Oklahoma utility company: New York-based BlackRock is a major investor in Tulsa-based ONEOK and ONE Gas.
In Jan. 23 filings with the Securities and Exchange Commission, BlackRock disclosed it owns 10.8% of ONEOK, based on sole voting power of 44,741,511 shares, and owns 6.7 million shares, or 12.6%, of ONEGAS.
ONE Gas is a regulated natural-gas utility comprising three operating companies: Oklahoma Natural Gas Co. (ONG), Kansas Gas Service, and Texas Gas Service.
ONG has more than 1,100 employees and serves 905,000 residential, commercial and industrial customers in Oklahoma.
Southwest Oklahoma communities ONG serves include Elgin, Fletcher, Fort Sill, Duncan, Comanche, Cyril, Apache, Cement, Carnegie, Fort Cobb, Rush Springs, Marlow, Eldorado, Duke, Hobart, Gotebo, Snyder, Mountain Park, Lone Wolf, Mountain View, Waurika, Davidson, Frederick, Grandfield, Manitou, Tipton, Gould and Hollis.
ONEOK is a Fortune 500 company involved in the natural gas and natural gas liquids businesses. ONEOK owns/operates 1,500 miles of interstate natural gas pipelines, 5,100 miles of state-regulated intrastate natural-gas transmission pipelines, plus six underground natural-gas storage facilities. It had 2,750 employees in 2022, records indicate.