Legislation in the Oklahoma House of Representatives introduced by Rep. Mark Lepak, HB 3541, would combat environmental, social and governance (ESG) scoring regimes by ensuring that taxpayer dollars do not fund commercial boycotts that reduce economic growth, cause job losses, and shrink Oklahoma’s tax base.
ESG scores are essentially a risk assessment mechanism increasingly being used by investment firms and financial institutions that forces large and small companies to focus upon politically motivated, subjective goals which often run counter to their financial interests and the interests of their customers. Companies are graded on these mandated commitments to promote, for example, climate or social justice objectives. Those that score poorly are punished by divestment, reduced access to credit and capital, and a refusal from state and municipal governments to contract with them.
To combat this, HB 3541 would amend the Energy Discrimination Elimination Act of 2022 to empower the state treasurer to compile a list of financial institutions that are boycotting “targeted” companies in the state for political or ideological reasons. As the bill states, boycotting a targeted company means “without an ordinary business purpose, refusing to deal with, terminating business activities with, or otherwise taking any action that is intended to penalize, inflict economic harm on, or limit commercial relations with a company because the company…engages in the exploration, production, utilization, transportation, sale, or manufacturing of timber, mining, agriculture, or fossil-fuel-based energy and does not commit or pledge to meet environmental standards beyond applicable federal and state law.”
The treasurer then can take steps to completely terminate the contract of any state agency with a boycotting institution within 360 days.
Sooner State lawmakers would be well advised to understand the impact that ESG investing has not only on its pensioners but on the very industries that are central to Oklahoma’s economy. As Heritage Action for America notes, “these climate policies are sure to particularly harm Oklahomans, given that oil and gas are the state’s top industries by revenue and provided over $2 billion in tax revenue in the past 12 months.”
Critics of anti-ESG legislation have charged that bills such as this distort the free market and could possibly lower a state’s credit rating. However, the true distortion is being perpetrated by those seeking to use the financial agencies as a de facto governmental regulator. By allowing ESG to gain a foothold in Oklahoma, Sooner State legislators would be perpetuating this distorted marketplace, and nothing in the bill forces Iowa fiduciaries to use uneconomical investment options.
The collusion of corporations and institutions to boycott, divest from, or sanction any industry only hurts Oklahoma consumers and shareholders and could affect the long-term economic health of the state’s economy. By clarifying the fiduciary duties of Oklahoma’s pension fund managers by ensuring state funds don’t go to entities participating in and funding commercial boycotts, and by insisting that maximizing the return on investment for clients be their only guiding principle, Oklahoma legislators can help ensure the long-term fiscal health of both the Sooner State’s pension systems and economy as a whole. To do this, they must pass HB 3541.
The following documents provide more information about ESG.
Environmental, Social, and Governance (ESG) Scores: A Threat to Individual Liberty, Free Markets, and the U.S. Economy
https://heartland.org/wp-content/uploads/2023/04/2023-ESG-ReportvWeb-2.pdf
This policy paper by Heartland Institute research fellow Jack McPherrin provides a comprehensive overview of ESG and proposes specific policy recommendations to counteract ESG’s insidious influence.
ESG: A Simple Breakdown of its Components
https://heartland.org/wp-content/uploads/2022/12/PolicyTipSheetESG1.pdf
This Heartland Institute Policy Tip Sheet provides a brief description of each of the three categories comprising a company’s risk assessment based upon ESG metrics, using one of the most commonly used ESG frameworks developed by the International Business Council.
ESG: Financial Discrimination
https://heartland.org/wp-content/uploads/documents/PolicyTipSheetESG8src.pdf
This Heartland Institute Policy Tip Sheet discusses financial institutions’ discriminatory practices against consumers, and explains proposed solutions to the problem.
ESG: The Banking Industry
https://heartland.org/wp-content/uploads/documents/PolicyTipSheetESG7src.pdf
This Heartland Institute Policy Tip Sheet briefly summarizes how the banking industry has used its coercive market power to weaponize ESG compliance.
ESG: Central Bank Digital Currencies
https://heartland.org/wp-content/uploads/documents/PolicyTipSheetESG6.pdf
This Heartland Institute Policy Tip Sheet provides a brief summary of central bank digital currencies (CBDCs) and how they can be wielded against society to enforce ESG compliance.
ESG: Negative Effects on Food Supply and Agriculture
https://heartland.org/wp-content/uploads/documents/PolicyTipSheetESG5.pdf
This Heartland Institute Policy Tip Sheet provides a brief summary of how ESG is being weaponized against farmers, food production, and the agricultural industry as a whole.
ESG: The Effects Upon Free Markets
https://heartland.org/wp-content/uploads/documents/PolicyTipSheetESG3.pdf
This Heartland Institute Policy Tip Sheet offers a brief description of how ESG systems fundamentally alter free markets and the natural equilibrium of supply and demand.
ESG: The Role of the U.S. Securities and Exchange Commission
https://heartland.org/wp-content/uploads/documents/PolicyTipSheetESG2.pdf
This Heartland Institute Policy Tip Sheet offers a brief description of the role of the U.S. Securities and Exchange Commission (SEC) in coercing companies into ESG compliance.
Heartland Impact is the new advocacy and outreach arm of The Heartland Institute.
Heartland Impact specializes on providing state lawmakers the policy and advocacy resources to advance free-market policies towards broad-based economic prosperity. This document does not necessarily represent the views of The Heartland Institute.
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