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TO: Interested Parties

FROM: Unlocking America’s Future

DATE: May 10, 2024

RE: Texas’ Anti-Responsible Investing Law at Risk after Oklahoma Judge Rules Similar Law Unconstitutional

This past Tuesday an Oklahoma judge issued an injunction blocking enforcement of a draconian anti-responsible investing law which targets public funds being invested using ESG criteria. Oklahoma’s law was based on Texas’s anti-ESG law. In both states politicians sought to protect the bottom lines of oil and gas company CEOs at the expense of taxpayers. These attacks on responsible investing have led to disastrous results for the business community, including throwing the municipal bond market into chaos and hundreds of millions in lost economic activity or additional costs to local governments in both Oklahoma and Texas. Similarly, everyday Americans stand to foot the bill from this misguided culture war due to the myriad of unintended consequences emerging from these efforts, including threats to state pensions and even problems for local main street banks.

Given the similarity between the Oklahoma law and the Texas law, the question stands: will Texas’s anti-ESG law fall next? 


In 2021 and 2022, Texas And Oklahoma Both Passed Bills Requiring State Entities To Divest From Financial Institutions That Purportedly “Boycotted” The Fossil Fuel Industry.

June 2021: Texas Passes A Law Prohibiting State Pension Funds From Investing With Firms That Allegedly Boycott The Fossil Fuel Industry.  “Gov. Greg Abbott signed a bill into law Monday banning state investments in businesses that cut ties with the oil and gas industry. The underlying message, according to one of the most powerful energy regulators in the state, is simple: Boycott Texas, and we’ll boycott you. The new measure is Texas’ Republicans latest rebuke of ESG investing as the state clings to its status as America’s crude capital. Oil and gas companies, already under pressure to funnel more cash into dividends to please shareholders, are now having to reckon with major corporations from Wall Street banks to Silicon Valley tech giants deeming climate change as a top priority when determining investments.” [Pensions & Investments, 06/15/21]

  • This Came In The Wake Of Several Efforts In Texas Since 2017 To Ban Public Investment In Entities That Purportedly Discriminate Against Firearm Businesses Or Associations, Or Boycott Israel. “Since 2017, the Texas Legislature has passed, and Governor Greg Abbott has signed into law, a series of restrictions on the ability of Governmental Entities to do business with companies that boycott energy companies, discriminate against firearm entities or associations, or boycott Israel. Pursuant to these laws, no Texas Governmental Entity may enter into a contract with such boycotters or discriminators for the purchase of goods or services with a value of at least $100,000.Moreover, contracts with Governmental Entities must include a written verification from the company that it does not and will not during the term of the contract (i) boycott energy companies (“SB 13”); (ii) have a practice, policy, guidance, or directive that discriminates against a firearm entity or firearm trade association (“SB 19”); or (iii) boycott Israel.” [Texas OAG Advisory, 10/18/23]

May 2022: Oklahoma Passes Its Own Anti-Boycott Bill, Requiring State Entities To Divest From Financial Companies That “Boycott Energy Companies.” “Gov. Kevin Stitt on Monday signed into law a measure that would require the state to divest from any financial company that boycotts the energy industry. House Bill 2034, the Energy Discrimination Elimination Act of 2022, is authored by Rep. Mark McBride, R-Moore…HB2034 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, according to a press release. The entity also must send a written notice to the financial company warning that it may become subject to divestment and offer the company the opportunity to clarify its activities. A state governmental entity must rid itself of at least 50 percent of the assets of a listed financial company within 180 days of the financial company receiving notice and 100 percent of the assets within 360 days after notice unless a loss of assets can be proven, according to a press release.”  [The Lawton Constitution, 05/11/22]

The Anti-Boycott Laws Led To Hundreds Of Millions In Extra Costs And Lost Economic Opportunities In Both Texas And Oklahoma.

Brookings: The Texas Bills Prohibiting Municipalities From Doing Business With Banks That Restrict Funding Of Oil And Gas And Firearms Will Cost Texas Taxpayers $300-$500 Million In Additional Interest In The First Eight Months Of Implementation Of The Laws. “The Texas state legislature in September 2021 barred any of the state’s municipalities from contracting with banks that restrict funding of oil and gas or firearms companies. The laws led to the abrupt exit of five of the largest municipal bond underwriters from Texas; these underwriters had accounted for a bit more than a quarter of all the competitive bids for municipal bond underwriting in Texas. The issuers previously reliant on the targeted banks were more likely to rely on negotiated borrowing instead of holding an auction, and received worse pricing after the implementation of the law. As a result, we estimate that Texas issuers will incur $300-$500 million in additional interest on the $31.8 billion borrowed during the first eight months following the implementation of the law.” [Brookings, 4/12/23]

March 2024: Texas Anti-ESG Laws Have Already Cost The State “Hundreds Of Millions In Lost Economic Activity And More Than 3,000 Full-Time Jobs.” “A pair of anti-ESG laws Texas passed in 2021 are costing the state hundreds of millions in lost economic activity and more than 3,000 full-time jobs, a new study found. The findings of the research add to those in an academic paper last year that showed significant increases in borrowing costs for the Lone Star State as a result of the legislation, which blocks its business with companies perceived to be boycotting the oil or firearms industries…. While the new report is not novel in finding that the state’s laws appear to have backfired, the source behind the paper is revealing. It was published by the Texas Association of Business, a chamber of commerce that among many members includes major oil companies like ExxonMobil, Chevron, and ConocoPhillips.”  [InvestmentNews, 03/18/24]

  • The Additional Interest Payments Due To The Boycott Bills Could Cost $37.1 Million In State & Local Tax Revenue. “Further examination of transaction costs associated with issuing debt, specifically the underwriters spread, shows a sharp increase in the fiscal years 2022-23 in the wake of the laws’ implementation.  Applying the historic average from fiscal years 2015-21 implies excess costs of $270.4 million.  These funds are no longer available for the basic functions of government; when run through a model of the Texas economy, this translates to $668.7 million in lost economic activity, value-added of $342.6 million, $180.7 million in annual earnings, 3,034 full-time, permanent jobs, and $37.1 million in State and local tax revenue.” [TXP Study, Winter 2024]

In Oklahoma, A Republican State Senator Said Changes Needed To Be Made To The Anti-Boycott Bill “So That State Entities Are Not Losing Money As A Result Of Their Pulling Back From Boycotted Investments.” “A law protecting the oil and gas industry needs some changes, a legislative panel was told Wednesday. Sen. Dave Rader, R-Tulsa, hosted an interim study on House Bill 2034 before the Senate Appropriations Committee…Rader said tweaks need to be made to the law so that state entities are not losing money as a result of their pulling back from investments in companies on the list.” [Tulsa World, 10/11/23]

The Oklahoma Rural Association Commissioned A 2024 Study That Revealed Numerous Negative Consequences From The Energy Discrimination Elimination Act, Including $180 Million In Additional Expenses For Local Municipalities And Higher Taxes.

  • A 15.7% increase in borrowing costs for Oklahoma municipalities compared to non-EDEA adopting states. 
  • $184,777,344 in additional expenses for local municipalities since the policy’s enactment, or $10,869,256 per month of the policy’s tenure thus far.
  • Increased borrowing costs, which negatively impact Oklahoma municipalities through:
  • Higher taxes.
  • Reducing expenditures in other areas.
  • Delays or complete abandonment of projects intended to improve infrastructure and quality of life. 
[Oklahoma Farm Report, 04/22/24]


May 2024: An Oklahoma Judge Blocks The State’s Anti-Responsible Investing “Anti-Boycott” Law Amidst Allegations The Law Violates The Oklahoma Constitution.

In May 2024, An Oklahoma District Court Judge Blocked Implementation of Oklahoma’s “Anti-Boycott” Bill After An Oklahoma Retiree Filed Suit Alleging The Law Violated The Oklahoma State Constitution. “A judge in Oklahoma blocked a state law that prohibits state pension systems from contracting with companies that limit investment in the oil and gas industry. Oklahoma County District Court Judge Sheila Stinson on Tuesday issued a temporary injunction blocking enforcement of the law after finding retiree Don Keenan is likely to succeed in his lawsuit filed last year alleging the law violates the state constitution and is too vaguely written.” [Reuters, 05/08/24]

  • “The Oklahoma Law Prohibits State Agencies From Doing Business With Financial Firms That Limit Investments In Energy Companies, And Requires The State Treasurer To Maintain A List Of Those Companies Even If They Continue To Own Shares In Fossil Fuel Firms.” “The Oklahoma law prohibits state agencies from doing business with financial firms that limit investments in energy companies, and requires the state treasurer to maintain a list of those companies even if they continue to own shares in fossil fuel firms. Treasurer Todd Russ last year included BlackRock, Wells Fargo, JPMorgan Chase and Bank of America. In her ruling, Stinson said the state constitution requires retirement funds be managed for the exclusive benefit of their beneficiaries, but the law appears aimed at countering certain political agendas and to help the oil and gas sector. Stinson also said the law contains conflicting and unclear definitions for key terms.” [Reuters, 05/08/24]

The Judge Found That The Anti-Boycott Law Likely Violated A Provision Of The Oklahoma Constitution.

In Her Order Blocking The Law From Taking Effect, The Judge Wrote That It Was Highly Likely The Law Was “Contrary To And A Violation Of Oklahoma Constitution Article 23, Section 12.” “‘The granting of a temporary restraining order to put the implementation of the Oklahoma Energy Discrimination Elimination Act on hold is a good first step. We believe a more thorough review by the courts will show this legislation harms Oklahoma retirees,’ Tim Hill, president of the Alliance for Prosperity and a Secure Retirement, said in an emailed statement to The Oklahoman. Hill said the judge noted in her order ‘the Court finds a substantial likelihood that this stated purpose of countering a “political agenda” is contrary to the retirement system’s constitutionally stated purpose. And 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 Okla. Const. Art. 23, §12.’” [The Oklahoman, 05/08/24]

  • Oklahoma Constitution Article 23, Section 12 Says Assets And Income Of Any Public Retirement System Administered By The State Of Oklahoma Must Be Held And Invested “For The Exclusive Purpose Of Providing For Benefits, Refunds, Investment Management, And Administrative Expenses Of The Individual Public Retirement System, And Shall Not Be Encumbered For Or Diverted To Any Other Purposes.” “All the proceeds, assets and income of any public retirement system administered by an agency of the State of Oklahoma shall be held, invested, or disbursed as provided for by law as in trust for the exclusive purpose of providing for benefits, refunds, investment management, and administrative expenses of the individual public retirement system, and shall not be encumbered for or diverted to any other purposes.” [Oklahoma Constitution, Article 23, Section 12, accessed 05/09/24]

At Least One Legal Expert Notes That The Oklahoma Ruling Could Expose Legal Vulnerabilities In States With Similar Laws.

A Legal Expert Said The Oklahoma Ruling “May Illustrate Legal Vulnerabilities Of Other ‘Anti-Boycott’ Laws” In Other States Because “The Principles Animating The Court’s Reasoning Should Resonate Broadly.” “Legal experts say the judge’s decision, while specific to Oklahoma law, may illustrate legal vulnerabilities of other ‘anti-boycott’ laws passed by Republicans in other states. Robert Skinner, a lawyer at the law firm Ropes & Gray, said ‘the principles animating the court’s reasoning should resonate broadly’ in other states with similar laws. ‘Many of these statutes are vulnerable to the same critique — that using pension assets as a political tool for the supposed ‘protection’ of particular industries runs afoul of state law mandates that pensions must be managed solely in the interest of retirees,’ Skinner said.” [Reuters, 05/08/24]

Oklahoma’s Law Is Nearly A Direct Copy Of The 2021 Texas Boycott Bill.

Oklahoma’s Law Is “Nearly A Word-For-Word Copy” Of The 2021 Texas Boycott Bill.” “Oklahoma’s Energy Discrimination Elimination Act was not actually written by Oklahoma lawmakers, and is nearly a word-for-word copy of a law passed in 2021 by Texas and later introduced by the American Legislative Exchange Council.” [The Frontier, 05/23/23]

Texas Law Has Similar Requirements As Oklahoma’s.

The Texas Constitution Requires That Statewide Retirement Benefit System Boards Of Trustees Must “Exercise The Judgment And Care Under The Circumstances Then Prevailing That Persons Of Ordinary Prudence, Discretion, And Intelligence Exercise In The Management Of Their Own Affairs.” “Each statewide benefit system must have a board of trustees to administer the system and to invest the funds of the system in such securities as the board may consider prudent investments.  In making investments, a board shall exercise the judgment and care under the circumstances then prevailing that persons of ordinary prudence, discretion, and intelligence exercise in the management of their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income therefrom as well as the probable safety of their capital.  The legislature by law may further restrict the investment discretion of a board.” [Texas Constitution, Article 16 § 12(a)(3), accessed 05/09/24]

  • Texas’ Government Code Also Requires Investment Managers Of A Public Retirement System To Manage Investments Exclusively For The Purposes Of “Providing Benefits To Participants” And “Defraying Reasonable Expenses Of Administering The System.” “Sec. 802.203.  FIDUCIARY RESPONSIBILITY.  (a)  In making and supervising investments of the reserve fund of a public retirement system, an investment manager or the governing body shall discharge its duties solely in the interest of the participants and beneficiaries:

(1)  for the exclusive purposes of:

(A)  providing benefits to participants and their beneficiaries;  and

(B)  defraying reasonable expenses of administering the system;

(2)  with the care, skill, prudence, and diligence under the prevailing circumstances that a prudent person acting in a like capacity and familiar with matters of the type would use in the conduct of an enterprise with a like character and like aims.” [Texas Government Code, Title 8, Subtitle A, Chapter 802, Subchapter A. Sec. 802.203, accessed 05/09/24]


Not only is the Texas anti-responsible investing law bad for Texans, it may well be unconstitutional. As Texas politicians continue their descent into extremism, they are actively alienating businesses and undoing the Texas miracle. Other states seeking to grow their economies and ensure state pensioners can retire comfortably should look at Texas and Oklahoma as examples of what not to do.