
Energy , Culture & the Family
Jonathan Small | February 10, 2025
Court ruling a warning for Oklahoma state pensions
Jonathan Small
A recent ruling by a U.S. District Court validates Oklahoma law and also fires a warning shot across the bow for the managers of state pension systems.
In Spence v. American Airlines, pilot Bryan P. Spence asked a federal court to declare that American Airlines breached its fiduciary duties in violation of the federal Employee Retirement Income Security Act (ERISA) because managers of that company’s retirement plan pursued “environmental, social, and governance” (ESG) strategies that could reduce pension benefits.
U.S. District Judge Reed O’Connor sided with Spence and found that the company had violated federal law. O’Connor noted that ESG investments often underperform traditional investments by approximately 10 percent, based on testimony.
O’Connor noted that ESG investing is not based on maximizing profit for pension retirees, but instead on bringing about “certain types of societal change.” The judge noted that ESG investing can be based on environmental factors such as a company’s carbon footprint or whether toxic chemicals are involved in manufacturing processes; social factors including how a company addresses LGBTQ+ interests or embraces “diversity, equity, and inclusion” (DEI) programs and hiring practices; and governance factors.
“The belief that ESG considerations confer a license to ignore pecuniary benefits is mistaken,” O’Connor wrote. “ERISA does not permit a fiduciary to pursue a non-pecuniary interest no matter how noble it might view the aim.”
“ESG activism has no place in managing state funds. It’s short-sighted, it’s reckless, and it’s a violation of trust.” —Oklahoma State Treasurer Todd Russ
The federal ruling bolsters an Oklahoma state law that is now being challenged in court.
In 2022, Oklahoma lawmakers passed the “Energy Discrimination Elimination Act” (EDEA), which requires the office of the state treasurer to identify firms that boycott investments in oil and gas companies due to those firms’ embrace of ESG policies.
Companies on the list cannot receive state contracts, including for management of state pension assets.
Oklahoma State Treasurer Todd Russ was among those who hailed the court decision, saying, “This ruling reinforces what I’ve said from the start: ESG activism has no place in managing state funds. It’s short-sighted, it’s reckless, and it’s a violation of trust.”
Oklahoma’s Energy Discrimination Elimination Act was passed, in part, because ESG strategies reduce investment returns for retirees.
But the court decision is also a warning for those charged with oversight of Oklahoma’s pension funds, including some entities that have sought to be exempted from the Energy Discrimination Elimination Act. If they have contracts with entities that promote ESG strategies and activism, those with oversight authority could quickly land on the losing end of lawsuits similar to the one filed by Spencer.
It never made sense for Oklahoma state pension assets to be used to attack the state’s major industries. And it especially makes no sense to pursue such a bone-headed idea at the expense of state retirees, particularly now that it is clear ESG investing means pension managers are violating federal law.

Jonathan Small
President
Jonathan Small, C.P.A., serves as President and joined the staff in December of 2010. Previously, Jonathan served as a budget analyst for the Oklahoma Office of State Finance, as a fiscal policy analyst and research analyst for the Oklahoma House of Representatives, and as director of government affairs for the Oklahoma Insurance Department. Small’s work includes co-authoring “Economics 101” with Dr. Arthur Laffer and Dr. Wayne Winegarden, and his policy expertise has been referenced by The Oklahoman, the Tulsa World, National Review, the L.A. Times, The Hill, the Wall Street Journal and the Huffington Post. His weekly column “Free Market Friday” is published by the Journal Record and syndicated in 27 markets. A recipient of the American Legislative Exchange Council’s prestigious Private Sector Member of the Year award, Small is nationally recognized for his work to promote free markets, limited government and innovative public policy reforms. Jonathan holds a B.A. in Accounting from the University of Central Oklahoma and is a Certified Public Accountant.