Two Oklahoma officials are concerned that a state retirement system’s overseers may have tailored a proposal request (RFP) to favor an investment firm that allegedly boycotts oil and gas companies.
Oklahoma State Treasurer Todd Russ and Auditor and Inspector Cindy Byrd are concerned that the RFP gave BlackRock Investments responsibility for 60 percent of the Oklahoma Public Employee Retirement System’s (OPERS) assets—approximately $7 billion— in possible violation of state law.
BlackRock is on a list of companies barred by state law from handling state funds because it boycotts oil and gas companies. The oil industry has been a driver of Oklahoma’s economy for over a century.
State Street, another firm handling state funds, is also on the prohibited list. But it hasn’t drawn quite as much attention as its larger competitor.
This may violate the Oklahoma Energy Discrimination Elimination Act of 2022 (EDEA). The law prohibits state investments from being handled by any firm that boycotts oil and gas producers.
BlackRock representatives did not respond to an email from The Epoch Times.
However, in a letter to the Oklahoma Treasurer’s office, BlackRock Senior Managing Director and Vice Chairman Mark McCombe said BlackRock is focused on its responsibility to its clients.
“BlackRock does not boycott energy companies,” Mr. McCombe wrote in the letter.
According to the letter, BlackRock has $319 billion invested in public energy companies worldwide, with $15 billion invested in Oklahoma. More than 90 percent of that is “invested in traditional energies like oil and gas.”
There are indications that the investment firm is separating itself from ESG investing.
In recent weeks, BlackRock has stopped using the term. In a report released in August, BlackRock reported backing 7 percent of ESG proposals at company meetings in the 12 months to June, a sharp drop from last year when it supported 22 percent and 2021 when it voted in favor of nearly half.
In the letter, Mr. McCombe pointed out that ESG policies are a reality and that there is a trend of increased government regulation and consumer demand for alternatives to carbon-based energy.
“As fiduciaries, we advise clients on major structural trends that we believe may impact their portfolios. One such trend is the change in government policies, technology, and consumer preferences associated with the transition to a low-carbon economy,” the letter reads.
“Our investment decisions are governed strictly by our fiduciary duty to clients, and that duty requires us to prioritize our clients’ financial interests above any commitments or pledges not required by law.”
But Mr. Russ and Ms. Byrd say their concerns go beyond the EDEA law and boycotting oil companies.
The pair also questioned the RFP process at the Oklahoma State Pension Commission meeting on Sept. 12. The commission oversees several state pension and retirement funds.
After that meeting, Joseph Fox, OPERS executive director, promised to explain why BlackRock was selected.
Mr. Fox did not return an email from The Epoch Times.
OPERS Claimed Exemption
He wrote that OPERS claimed an exemption under the EDEA law based on its “fiduciary responsibility” to the state employees whose funds are being managed.“A state governmental entity shall not be subject to any requirement of this act if the state governmental entity determines that such requirement would be inconsistent with its fiduciary responsibility concerning the investment of entity assets or other duties imposed by law relating to the investment of entity assets,” the EDEA exemption reads.
According to the OPERS memo, divesting would cost at least $9.7 million in fees and other costs.
“It is conceivable that the total loss in market value experienced by the plans due to these actions could potentially be multiple times that of the estimated costs stated above,” the OPERS memo reads.
RFP Process ‘Tightened’
Mr. Russ said “rigged” was too strong for the RFP process. But, he said it did appear OPERS officials had one company in mind.“The RFP within itself wasn’t a problem. They tightened up the RFP to meet the current constituent and investor,” Mr. Russ said.
Ms. Byrd was less diplomatic in her assessment.
“In the auditing world, we do call that practice ‘bid rigging,’” she said.
On Sept. 14, Mr. Russ sent a letter to Mr. Fox and the OPERS Board of Trustees outlining three concerns. Based on those, Mr. Russ wrote, the OPERS board should have selected another firm or sought more applicants.
Mr. Russ sent copies of the letter to the Speaker of the Oklahoma House of Representatives, Rep. Charles McCall, Oklahoma Senate President Pro Tempore Sen. Greg Treat, and Oklahoma Attorney General Gentner Drummond.
Neither Mr. McCall nor Mr. Treat returned calls seeking comment.
Phil Bacharach, a spokesman for Mr. Drummond’s office, said the Attorney General had no comment.
In the letter, Mr. Russ wrote that rather than spread the state investments among different managers to reduce risk; the OPERS board kept more than half of the pension funds under BlackRock.
His letter claims five of the eight funds had low or no switching fees. To determine the costs for the last three would require a complete RFP process, which Mr. Russ claims did not happen.
He wrote that respondents were given only three weeks to present their proposals in this case. Mr. Russ pointed out that previous RFPs allowed up to six weeks for a response. He claimed that OPERS summarily decided to keep BlackRock without fully considering the competing firms.
Finally, he wrote that the decision to retain BlackRock’s services violated OPERS fiduciary duties because of BlackRock’s commitment to ESG principles.
“Companies like BlackRock and State Street have openly made commitments to use all assets under management—including OPERS’ assets—not for the benefit of OPERS, but for their own ideological objectives,” Mr. Russ wrote.
