State Court Rules Anti-ESG Investing Law Violates Oklahoma Constitution

A judge in Oklahoma has granted a temporary injunction halting a state law that forbids public entities, including pension funds, from doing business with companies that “boycott” the oil and gas industry, saying it could affect the “financial soundness” of state retirement investment accounts.

The motion seeking the injunction was filed late last year by Donald Keenan, a former president of the Oklahoma Public Employees Association, to prevent state Treasurer Todd Russ from implementing the Energy Discrimination Elimination Act of 2022. The law declares the oil-and-gas industry a vital part of Oklahoma’s economy and that the state and companies that do business with the state should not “boycott” the sector. It also prohibits the state from signing a contract with a company that does not submit written certification that it is not currently engaged in a boycott of the oil-and-gas industry.

When Russ first took office in early 2023, he said publicly that he had begun compiling a list of companies, banks and other entities that “act against Oklahoma’s interests” because of their stance regarding environmental, social and governance investment principles. He added that “it is my responsibility to ensure Oklahomans’ tax dollars will not be used to enrich organizations that act counter to our taxpayers’ interests and our values.”

In the motion for an injunction, Keenan called the law “governmental overreach” and said it violates the First Amendment. The injunction also claimed the financial costs of the act would be “monumental.”

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The issue before the court was whether the Energy Discrimination Elimination Act and the directives of the state treasurer shifted the constitutionally mandated exclusive purpose of the Oklahoma Public Employees Retirement System’s assets. Judge Sheila Stinson ruled that there is a “substantial likelihood that plaintiff will succeed on this issue.”

In her ruling, Stinson said that “an attempt by the treasurer or the board to divest or transfer funds for any purpose other than the benefit of the members or beneficiaries is contrary to and a violation” of the Oklahoma Constitution. Stinson noted that in Russ’ notice to the OPERS board he states that the purpose of the act is to counter the “political agenda” of certain financial companies and to assist the economic status of the oil and gas sector.

The court said it found “a substantial likelihood that this stated purpose of countering a ‘political agenda’ is contrary to the retirement system’s constitutionally stated purpose.” The court also found that divesture or transfer of assets and investments “has the potential to affect the financial soundness of the investment accounts.”

Stinson added that Keenan “has established by clear and convincing evidence that the threat of injury outweighs any threatened harm to the Defendant, and further, that a temporary injunction would serve the public interest.”

Representatives for Russ did not immediately respond to a request for comment.