Oklahoma Judge Halts Anti-ESG Law Amidst Lawsuit and Controversy

Oklahoma County district judge grants temporary injunction on state's Energy Discrimination Elimination Act of 2022, halting enforcement of law banning investments in financial companies with ESG policies. Judge rules law's purpose contrary to retirement system's constitutionally stated purpose, citing potential impact on financial soundness.

author-image
Aqsa Younas Rana
New Update
Oklahoma Judge Halts Anti-ESG Law Amidst Lawsuit and Controversy

Oklahoma Judge Halts Anti-ESG Law Amidst Lawsuit and Controversy

An Oklahoma County district judge has granted a temporary injunction on the state's Energy Discrimination Elimination Act of 2022, halting enforcement of the law that bans investments in financial companies with environmental, social, and governance (ESG) policies. The decision by Judge Sheila Stinson on Monday comes amidst a lawsuit filed by a retired state employee who claims the law jeopardizes his pension.

Why this matters: This injunction has significant implications for the ongoing debate over ESG policies and their role in shaping the investment landscape. The outcome of this case could set a precedent for other states considering similar anti-ESG laws, potentially influencing the balance of power between fossil fuel interests and environmental concerns.

The controversial law, passed in 2022, requires State Treasurer Todd Russ to create a list of banks and financial firms with ESG policies that prevent them from investing in the oil and gas industry. The current list includes prominent institutions such as BlackRock Inc., Wells Fargo Co., JP Morgan Chase Co., Bank of America, State Street Corp., Climate First Bank, and Barclays PLC.

In her ruling, Judge Stinson stated that the law's purpose of countering a "political agenda" is contrary to the retirement system's constitutionally stated purpose. She wrote that the "divestiture or transfer of assets and investments has the potential to affect the financial soundness of the investment accounts." The judge enjoined the state from enforcing the law until the case is decided.

The injunction has ignited a war of words between Treasurer Russ and Attorney General Gentner Drummond. Drummond fired the outside counsel hired by Russ to defend the lawsuit, blaming the attorney for failing to secure a favorable ruling. "It is extremely disappointing that the counsel hired by Treasurer Russ was unable to secure a favorable ruling in defense of Oklahoma's anti-ESG law," Drummond said. "Because of this failure, the law is now on hold and at risk of being struck down entirely. Oklahomans deserve better."

Russ disputed Drummond's claims, stating that he had asked the attorney general to take the case but was turned down. "When asking the attorney general to take my case, he refused,"Russ said. "So, I was left with no other choice but to choose who I was most comfortable representing me. My constitutional office as the State Treasurer makes me party to the lawsuit, and therefore I don't believe my decision-making authority can be removed."

The American Accountability Foundation, a conservative non-profit oversight group, defended Russ and accused Drummond of working with BlackRock behind closed doors to "tank" the case. The group obtained documents from the attorney general's office under Oklahoma's Open Records Act, which they claim show Drummond's close relationship with BlackRock and its lobbyists. "Put simply, Drummond does not want to take over to win the case, he wants to take over so that he can tank it and protect BlackRock," the foundation stated.

Gov. Kevin Stitt expressed disappointment with the ruling, stating that he thought it was "pretty clear" that the treasurer has the authority to enforce the act. He supported Russ in his selection of an attorney to defend the law. "I don't know how anybody could argue that we're not going to let companies come into Oklahoma and attack our oil and gas industry, and that's what the treasurer is trying to do, and we certainly support the treasurer in that effort," Stitt said.

The Oklahoma Public Employees Retirement System Board of Trustees took an exemption from the law, citing estimated costs of nearly $10 million to divest from blacklisted banks. As a result of the injunction, Russ' office will no longer be involved in the case, with Drummond terminating the counsel hired by Russ and removing the treasurer from any decision-making role in the lawsuit. The future of Oklahoma's anti-ESG law now hangs in the balance as the legal battle continues.