Energy

ESG study criticized for ‘significant flaws’; UCO prof defends work

August 2, 2024

Ray Carter

In 2022, state lawmakers passed the “Energy Discrimination Elimination Act” (EDEA), which prevents Oklahoma government entities, including pension funds, from contracting with firms that base investment decisions on so-called “Environmental, Social, and Governance” (ESG) policies.

In April, the Oklahoma Rural Association released a study by University of Central Oklahoma professor Travis Roach claiming the Energy Discrimination Elimination Act has increased municipal borrowing costs by 15.7 percent.

But in an email written while the report was in progress, Roach bluntly stated that he knew “almost nothing about” a key aspect of the study.

Critics say the email indicates the Oklahoma Rural Association study has no validity.

Among those critics is the American Accountability Foundation, a nonprofit government oversight and research organization that obtained and released Roach’s email.

“ESG forces paid Dr. Travis Roach about $6,800 to manufacture a ‘study’ showing that anti-ESG laws are bad,” officials with the American Accountability Foundation stated on X, the site formerly known as Twitter. “But in this private email he admits he actually ‘knows almost nothing about’ ESG. Yet his ‘study,’ legitimized by his supposed ‘expertise,’ was cited in dozens of articles bashing anti-ESG laws.”

In the Feb. 1, 2024, email sent from his university account, Roach wrote a colleague saying, “I have a question about a topic I know almost nothing about but am assuming you may know some good data sources. I’ve been asked by the Oklahoma Rural Association to look into local government finances and spending costs after the new ‘ESG’ bank ban in Oklahoma. The idea is to compare bond prices/rates/tenures for local governments/municipalities before and after the ESG ban to see if borrowing costs have gone up, and if so by how much. Do you know if there is any way to get this kind of information for OK and other states?”

Roach’s study was criticized for significant flaws even prior to the release of his Feb. 1 email.

A review released by the American Energy Institute examined the Oklahoma Rural Association study authored by Roach and found it riddled with flaws and omissions that skewed its findings.

“Fact versus Fiction: Examining Oklahoma’s Energy Discrimination Elimination Act of 2022” was authored by  Vance Ginn, former chief economist of the White House’s Office of Management and Budget and a fellow at the American Energy Institute, and Byron Schlomach, an economist with 30 years’ experience in state-level public policy.

Ginn and Schlomach found that Roach’s report “contains significant methodological flaws” and “fails to establish a causal relationship between the EDEA and higher municipal borrowing costs.”

Among the problems that Ginn and Schlomach identified in the Oklahoma Rural Association report was that a comparison of Oklahoma municipal bonds with a national index “shows Oklahoma’s interest rates varied by less since September 2022, before the law went into effect in November 2022 and when the Treasurer issued the restricted financial companies list in May 2023.”

The two economists also found that Roach’s Oklahoma Rural Association report ignored “the upward trend in interest rates” and contained “methodological challenges of correlation versus causation.”

Roach’s report for the Oklahoma Rural Association claimed the EDEA increased municipal borrowing costs by approximately 59 basis points (0.59 percent), a 15.7-percent increase compared to some states, and attributed that increase to reduced financial competition allegedly created by the EDEA.

However, Ginn and Schlomach noted that “a substantial outflow of funds from municipal bonds” occurred nationwide in 2022 and 2023 and Oklahoma’s municipal borrowing interest rates were “trending upward long before the EDEA’s passage and implementation.”

The American Accountability Foundation called Roach’s report “an example of the worst type of academic pay to play.”

When asked for comment about his Feb. 1 email, Roach responded, “The only response I have to this ad hominem attack is that I was simply asking a colleague for advice on a good data source—not that I have no expertise on the matter or have no expertise on the use of econometrics to determine the effects of policy on outcomes. They are seeking to take my words out of context to discredit me and have said nothing about the substance of my report.”

He also dismissed Ginn and Schlomach’s critique, calling it “either purposefully misleading to support partisan goals” or “incredibly sloppy.”

Roach said his report controlled for increasing borrowing costs due to the Federal Reserve tightening monetary policy. He also criticized Ginn and Schlomach’s analysis for saying Biden administration policies “have been pointedly hostile to the oil industry” and attributing those Biden administration policies with causing an “upward trend in Oklahoma’s municipal borrowing interest rates relative to the nation’s …”

Roach said, “Biden administration policies are apparently failing if their intent is to be hostile to the oil industry.”