Oklahoma's pension funds are scrambling to comply with the state's new law prohibiting them from investing with financial firms that incorporate environmental, social and governance considerations in their investment decision-making.
On Wednesday, Oklahoma State Treasurer Todd Russ issued a list of 13 financial institutions that the state's public pensions will not be allowed to work with because they were said to "engage in boycotts of fossil fuel companies."
The blacklist included heavy hitters BlackRock, State Street and J.P. Morgan Chase as well as lesser-known names such as WCM Investment Management and StepStone VC Global Partners.
Of the state's largest pension funds, the $10.3 billion Oklahoma Public Employees Retirement System appears to have the biggest problem on its hands as roughly 60% of its holdings are in BlackRock funds. The pension fund has $5.9 billion in BlackRock domestic fixed income and U.S. and international equity funds, according to a list of investment managers provided on the OPERS' website.
Joseph Fox, OPERS' executive director, did not respond to a request for comment.
"We are working on this, but at the present time we have several questions about the list," said Ginger Sigler, executive director of the $3 billion Oklahoma Police Pension & Retirement System.
Ms. Sigler said while the pension fund doesn't work with many of the blacklisted firms, "it wants to be diligent before making any changes to its current investments."
"We have contacted the state treasurer to get specifics on why certain companies were put on the list," she said.
Public pension funds will be required to divest all investments with the blacklisted firms if after 90 days they "continue to boycott energy companies," according to the state's Energy Discrimination Elimination Act, which Oklahoma passed last year.
Public pension funds must divest at least 50% of the assets within 180 days and must be fully divested within 360 days, according to the law.
A review of the most recent publicly available investment reports of Oklahoma's largest pension funds showed that the $19.7 billion Oklahoma Teachers' Retirement System had no exposure to any of the 13 blacklisted firms. The others — with the exception of OPERS — appeared to have minimal exposure.
The $1.1 billion Oklahoma Law Enforcement Retirement System had $105 million invested in the J.P. Morgan Strategic Property Fund and a small $296,000 holding in a Grosvenor long/short equity fund, according to the pension fund's investment report for March. Both J.P. Morgan and GCM Grosvenor are on Oklahoma's boycott list.
OLERS also made several commitments to FirstMark Capital, one of the banned asset managers, beginning in June 2020.
Oklahoma Police had a $468,000 holding in a Grosvenor long/short equity fund and made numerous commitments to FirstMark Capital as well as a $25 million commitment to Stepstone VC Global Partners, another blacklisted firm.
The $3.3 billion Oklahoma Firefighters Pension & Retirement System had $185 million in an international equity fund of WCM Investment Management, an asset manager on the boycott list, according to the pension fund's annual comprehensive financial report for the year ended June 30, 2021.
It also held $61 million in J.P. Morgan's JPMCB Specialty Situation Property Fund at the time, which it decided to terminate at a board meeting on April 21.
The executive directors of OLERS, Oklahoma Teachers and Oklahoma Firefighters did not respond to requests for comment.