OKLAHOMA CITY — State Treasurer Todd Russ has begun blacklisting several of the nation’s biggest financial companies from doing business with the State of Oklahoma.
Russ singled out 13 firms that he contends violate a 2022 law that directs the state to sever ties with financial institutions deemed hostile to oil/gas exploration/production companies or that didn’t answer questions from the treasurer’s office.
Russ announced that his office has received responses from almost 160 financial institutions to which it sent questionnaires, inquiring about their Environmental, Social, and Governance policies in accordance with House Bill 2034 – the Energy Discrimination Elimination Act of 2022.
That measure requires the treasurer to maintain and provide to each state governmental entity a list of financial institutions that boycott energy companies; those institutions are ineligible to receive state contracts.
“The energy sector is crucial to Oklahoma’s economy, providing jobs for our residents and helping drive economic growth,” said Russ. “It is essential for us to work with financial institutions that are focused on free-market principles and not beholden to social goals that override their fiduciary duties.”
After completing “an in-depth analysis,” Russ wrote, it was determined that an initial list of 13 financial institutions –including BlackRock, Wells Fargo & Co., JPMorgan Chase & Co., Bank of America, and State Street Bank – are ineligible for state contracts “because they are engaged in boycotts of fossil fuel companies or they failed to reply to the questionnaire.”
Also listed were GCM Grosvenor, Lexington Partners, FirstMark Fund Partners, Stepstone VC Global Partners, WCM Investment Management, William Blair, Actis, and Climate First Bank.
Other companies may be added to or removed from the list every 90 days as the internal analysis continues, Russ said.
The treasurer’s press release did not specify which of the financial firms are “boycotting” oil and gas companies and which did not respond to the state’s request for information.
JPMorgan Chase had assets totaling $3.2 trillion as of Dec. 31, 2022, according to the Federal Reserve.
Bank of America emailed this statement to Southwest Ledger: “We look forward to continued discussion with the Oklahoma Treasurer about the many ways we serve clients and communities in Oklahoma, including in the energy sector.”
Bank of America is this nation’s second largest bank, with assets of $2.4 trillion, according to the Federal Reserve. A fact sheet provided by Bank of America claimed it has a $576 million commercial loan portfolio in Oklahoma and 254,000 “digital active clients” in this state.
BlackRock responded that it is “a leading investor in the Oklahoma energy sector. On behalf of our clients, we invest over $15 billion in public energy companies based in Oklahoma and $320 billion in public energy companies globally. We invest billions more in renewable energy firms.”
BlackRock also wrote that it “offers our clients the choices to help them achieve their investment objectives.”
ESG standards prioritize environmental investments and favor green energy projects over oil and gas investments. Critics say the standards ignore legally mandated fiduciary responsibilities.
Energy production critical to economy
State Rep. Mark McBride (R-Moore), principal author of HB 2034, defended his measure.
“This legislation ultimately protects all Oklahomans from the overreach of companies that think they can govern our population through the use of political environmentalism,” he said. “Fossil fuels such as oil and gas are a major contributor to the livelihood of many Oklahomans as well as our overall economy. This critical industry employs thousands of Oklahomans and adds tremendously to our tax base. We must protect our assets as a state.”
According to the Oklahoma Energy Resources Board, the total economic impact of oil and gas and component industries in the state in 2022 was $64.9 billion, 27% of Oklahoma’s total economic activity. This included 198,965 direct or supporting jobs and $23.7 billion in salaries and wages.
HB 2034 requires the state treasurer to maintain and provide to each state governmental entity a list of financial companies that boycott energy companies. These entities must then notify the treasurer of the listed financial companies in which they own direct or indirect holdings.
The entity also must send a written notice to the financial company warning that it may become subject to divestiture, and offer the company the opportunity to clarify its activities.
A state governmental entity must rid itself of at least 50% of the assets of a listed financial company within 180 days of the financial company receiving notice, and 100% of the assets within 360 days after notice unless a loss of assets can be proven.
Entities also must report to the treasurer, the Legislature and the state’s attorney general any securities sold, redeemed, divested, or withdrawn from a listed financial company.
Companies have the opportunity to clarify their activities, and a step-down period is in place before complete divestment.
The law does not apply to indirect holdings in actively or passively managed investment funds or private equity funds, or if a sale would result in a financial loss for the state.
McBride’s bill – as well as similar measures enacted in several other states – was patterned after “model” legislation promoted by the American Legislative Exchange Council. ALEC is a corporate-funded organization that writes legislation for Republican-controlled states.
Bracing for blowback
Some observers are watching for any blowback that might materialize from the legislation, with a focus on BlackRock Inc.
BlackRock has come under fire from environmental supporters for investing in conventional energy, and from states claiming they perceive a boycott of the U.S. energy industry.
However, 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 states (Texas, Arkansas, 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 ESG (environmental, corporate, and social governance) investment policies.
At least one Oklahoma utility company has a lot at stake in the divestiture issue: New York-based BlackRock is a major investor in Tulsa-based ONEOK and ONE Gas.
In Jan. 23 filings with the U.S. 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 ONE Gas.
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.