Testimony Before the Oklahoma Senate Business and Insurance Committee

in Support of HB 4429

Tim Benson, Senior Policy Analyst

Heartland Impact

April 9, 2026

Chairman Coleman and Members of the Committee:

Thank you for holding this hearing on HB 4429, the Proxy Advisors Transparency Act, and allowing me the opportunity to give my perspective on this bill.

My name is Tim Benson, and I am the senior policy analyst with Heartland Impact. Heartland Impact is the advocacy and outreach arm of The Heartland Institute. Both are independent, national, nonprofit organizations working to discover, develop, and promote free-market solutions to social and economic problems. Heartland specializes in providing state lawmakers the policy and advocacy resources to advance free-market policies towards broad-based economic prosperity.

As you are likely well aware of, environmental, social, and governance (ESG) scores are essentially a risk assessment mechanism increasingly being used by investment firms and financial institutions that forces companies, entire industries, and society at large to focus upon politically motivated, subjective goals. Pursuing these goals often directly contravenes the interests of companies, shareholders, and customers, while also degrading macroeconomic prosperity, free markets, democratic institutions, and individual liberty.

Companies are graded on mandated ESG commitments to promote, for example, climate or social justice objectives. Those that are arbitrarily assigned low ESG scores can be punished by divestment, reduced access to credit and capital, and/or an inability to access financial services such as checking and savings accounts and insurance coverage.

HB 4429 establishes new requirements and disclosure obligations for proxy advisory services operating in Oklahoma. The Act specifically addresses concerns that proxy advisors have sometimes made recommendations based on ESG criteria. without conducting financial analyses, potentially misleading shareholders about the financial impact of such recommendations. Under the Act, proxy advisors who recommend votes against company management without a written financial analysis must provide conspicuous disclosures to shareholders and company boards, and must publicly state on their websites that such recommendations are not based on financial analysis. If recommendations are based on a written financial analysis, the analysis must be disclosed to shareholders and made available upon request, and also provided to the company’s board.

In recent years, a growing number of investment decisions and corporate governance outcomes have been influenced not by the financial interests of shareholders, but by the ideological ESG goals of asset managers and proxy advisors promoting “stakeholder capitalism.” At the center of this shift are the “Big Three” asset managers—BlackRock, Vanguard, and State Street—which collectively manage approximately $24.5 trillion in assets as of the end of 2025. Specifically, BlackRock manages approximately $11.6 trillion, Vanguard about $8.6 trillion, and State Street about $4.3 trillion.^[1]

The Oklahoma Public Employees Retirement System and Oklahoma’s Uniform Retirement System for Justices and Judges currently have around $7.3 billion in funds managed by BlackRock, with another $808 million managed by State Street.^[2]

The Big Three consistently funnel their clients’ investments into ESG-focused funds. Such investments typically underperform their traditional counterparts; for instance, a March 2025 report from Morgan Stanley found that sustainable funds delivered returns of 0.4 percent compared to returns of 1.7 percent delivered by traditional funds.^[3] Moreover, because these asset managers are the dominant shareholders in many of the largest public companies, they wield immense voting power at annual meetings and have the ability to sway or control corporate decisions through proxy voting.^[4]

Compounding the influence of these monolithic asset managers is the role of proxy advisory firms, especially Institutional Shareholder Services (ISS) and Glass Lewis, which together control approximately 97 percent of the proxy advisory market.^[5] These firms issue ESG-driven voting recommendations to institutional investors—including pension funds, mutual funds, and asset managers—that are often followed without question.

For instance, a 2018 review from the Harvard Law School Forum on Corporate Governance found that proxy advisors such as ISS and Glass Lewis can swing between 10 percent and 30 percent of shareholder votes.^[6] Another study by the American Council for Capital Formation found that 175 asset managers, controlling more than $5 trillion in assets, voted in accordance with the recommendations of ISS more than 95 percent of the time.^[7]

There are many instances of asset managers and proxy advisors using their influence in favor of ESG goals. For example, in 2021, BlackRock, Vanguard, and State Street voted against ExxonMobil’s board of directors to insert three new board members from the activist ESG fund Engine No. 1. Both ISS and Glass Lewis recommended voting in favor of most of the candidates as well.^[8] The new directors were explicitly chosen to shift Exxon’s strategy away from fossil fuel development. Exxon’s board had argued that the nominees lacked relevant expertise and could damage the company’s profitability.

Also in 2021, Chevron shareholders, influenced by ESG-aligned voting recommendations from ISS and support from BlackRock, Vanguard, and State Street, passed a proposal requiring the company to reduce “Scope 3” greenhouse gas emissions. Management opposed the resolution, noting it could directly impact production and revenue. Nevertheless, the measure passed in May 2021. In September 2021, Chevron announced $10 billion in new investments into renewable energy projects.^[9] In October, it published updated emissions reduction targets, pledging to decrease emissions by 5 percent by 2028.^[10]

More recently, in the class-action lawsuit Spence v. American Airlines Inc., the U.S. District Court for the Northern District of Texas ruled in January 2025 that American Airlines and its retirement plan fiduciaries violated their duty of loyalty by allowing BlackRock, the plan’s investment manager, to use employee retirement assets to advance ESG goals through proxy voting.^[11] The court found that “the facts compellingly demonstrated that Defendants breached their fiduciary duty by failing to loyally act solely in the retirement plan’s best financial interests by allowing their corporate interests, as well as BlackRock’s ESG interests, to influence management of the plan.”

Ultimately, this concentrated power structure creates a system where a small number of ideologically aligned institutions can impose ESG mandates across the corporate economy, often at the expense of shareholder returns, fiduciary responsibility, and market neutrality. The directives in the Proxy Advisors Transparency Act would help protect Oklahomans from that influence and ensure the long-term health of the state’s pension systems and Oklahomans’ pocketbooks.

Thank you for your time.

Heartland Impact can send an expert to your state to testify or brief your caucus; host an event in your state; or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact Cameron Sholty, at csholty@heartlandimpact.org or 312/377-4000.

[1] Numbers taken from Statista.com, accessed August 23, 2025.

[2] Lamar Johnson, “BlackRock, State Street retain Oklahoma pension system contracts after anti-ESG law pause,” ESGDive, May 20, 2024, https://www.esgdive.com/news/blackrock-state-street-retain-contracts-with-opers-okla-anti-esg-law/716613/.

[3] Morgan Stanley, “Sustainable Fund Returns Lag Peers’ in Second Half of 2024,” March 4, 2025, https://www.morganstanley.com/insights/articles/sustainable-funds-performance-second-half-2024.

[4] Lucian Bebchuk & Scott Hirst, “The Specter of the Giant Three,” Boston University Law Review, 721, 2019, https://scholarship.law.bu.edu/faculty_scholarship/602/.

[5] “Cracking the Proxy Advisory Duopoly,” The Wall Street Journal, July 12, 2023, https://www.wsj.com/opinion/proxy-advisory-firms-glass-lewis-institutional-shareholder-services-esg-investing-761e044f.

[6] David F. Larcker et al., “The Big Thumb on the Scale: An Overview of the Proxy Advisory Industry,” Harvard Law School Forum on Corporate Governance, June 14, 2018, https://corpgov.law.harvard.edu/2018/06/14/the-big-thumb-on-the-scale-an-overview-of-the-proxy-advisory-industry/.

[7] Timothy M. Doyle, “The Realities of Robo-Voting,” American Council for Capital Formation, November 2018, https://accf.org/wp-content/uploads/2018/11/ACCF-RoboVoting-Report_11_8_FINAL.pdf.

[8] Neil P. Stronski & Richard Grossman, “What the Exxon Mobil Shareholder Votes Mean,” Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates, June 16, 2021, https://www.skadden.com/insights/publications/2021/06/the-informed-board/what-the-exxon-mobil-shareholder-votes-mean.

[9] Chevron.com, “Chevron accelerates lower carbon ambitions,” September 14, 2021, https://www.chevron.com/what-we-do/energy/new-energies.

[10] Chevron.com, “Chevron sets net zero aspiration and new GHG intensity target,” October 11, 2021, https://www.chevron.com/newsroom/2021/Q4/chevron-sets-net-zero-aspiration-and-new-GHG-intensity-target.

[11] Spence v. American Airlines Inc., No. 4:23-cv-00552, 2025 WL 110195 (N.D. Tex. Jan. 10, 2025), accessed from https://climatecasechart.com/case/spence-v-american-airlines-inc/.