Last year, the State of Oklahoma enacted a law that “requires the state to stop doing business with financial companies that ‘boycott’ the oil-and-gas industry.”  However, as reported by the Wall Street Journal, “officials and pension employees are running into hurdles while trying to comply.”

Specifically, “the state's second-largest public pension found it would cost $10 million to move its money out of funds managed by . . . two of the blacklisted companies,” and so decided not to do so by taking advantage of one of the exemptions to the law.  Similarly, “the Officer of the State Treasurer said it would be impractical to end its banking relationships” with two blacklisted banks, and likewise invoked an exemption. 

The difficulties encountered by public entities in Oklahoma illustrate the practical hurdles involved in enacting a boycott against some of the most significant financial institutions in the United States.  And the politicians who enacted the anti-ESG statute are displeased by the lack of action taken by Oklahoma public entities--Oklahoma Treasurer Todd Russ publicly objected to the decision taken by the pension fund.  This tension--between the political and fiduciary aspects of public entities--is likely to resurface as these issues continue to evolve.

It is important to remember that Oklahoma is only one of several states that have enacted anti-ESG statutes (although Oklahoma's is particularly far-reaching).  The practical difficulties encountered by Oklahoma public entities are likely to be echoed across the country.  And the measures taken by these public entities--to use exemptions to avoid detrimental impacts imposed by the anti-ESG law--are likely to inspire similar tactics across the country and provide further support for those that viewed these anti-ESG laws as constituting political rhetoric rather than causing significant impacts on ordinary business conduct.