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• It seems likely that Oklahoma Senate Bill 714 (SB 714) aims to clarify and strengthen divestment rules by removing transaction costs from loss calculations, potentially making divestment easier.

• Research suggests that including transaction costs in loss determination could delay divestment indefinitely by justifying holding underperforming investments, while excluding them may expedite divestment.
• The bill is controversial, with debates over its impact on financial management versus policy goals, especially regarding ESG practices.

Evaluation of Wording in SB 714

Oklahoma Senate Bill 714, introduced in 2025, seeks to amend the Energy Discrimination Elimination Act of 2022 by transferring enforcement authority to the attorney general and making several changes to clarify divestment processes. Based on sponsor statements, the bill aims to eliminate the inclusion of transaction costs when determining a loss, which could otherwise delay divestment. This suggests the wording is intended to be clear and focused on policy compliance, ensuring divestment from financial companies boycotting energy sectors. However, without access to the full text, it's hard to confirm if the language avoids ambiguity, though sponsor amendments indicate efforts to refine definitions for precision.

Impact of Transaction Costs on Divestment

Including transaction costs in loss calculations might make net losses appear smaller, providing a reason to delay divestment, potentially indefinitely, by arguing selling incurs high costs. Excluding them, as proposed in SB 714, would base divestment on market performance alone, likely speeding up the process. This could align with policy goals but might overlook financial prudence, as transaction costs are real expenses. The change reflects a policy-driven approach, prioritizing compliance over financial optimization.

Detailed Analysis: Evaluation of Oklahoma Senate Bill 714 and Transaction Costs Impact

Introduction

Oklahoma Senate Bill 714 (SB 714), introduced in the 2025 legislative session, is a proposed amendment to the Energy Discrimination Elimination Act of 2022. This bill has sparked discussions due to its potential to reshape how state governmental entities handle divestment from financial companies, particularly those engaged in Environmental, Social, and Governance (ESG) practices that may conflict with Oklahoma's energy interests. The bill aims to transfer enforcement authority from the state treasurer to the attorney general and includes several amendments to clarify and strengthen divestment requirements. A key aspect is the elimination of transaction costs when determining a loss, which has raised questions about its implications for divestment practices.

This analysis evaluates the wording of SB 714, focusing on its clarity and effectiveness, and examines how the inclusion of transaction costs in loss determination impacts the potential for indefinite delays in divestment. The discussion is based on available legislative summaries, sponsor statements, and related news articles, as direct access to the full bill text was not possible.

Background on SB 714

SB 714 is part of a broader trend in states like Oklahoma to counteract perceived biases against traditional energy sectors, positioning the state as a defender of its energy interests. The original Energy Discrimination Elimination Act of 2022 required state entities to divest from financial institutions that boycott oil and gas companies, with enforcement handled by the state treasurer. SB 714 proposes to shift this authority to the attorney general and includes amendments to refine the law's provisions. According to Senator Dave Rader, the bill's sponsor, key changes include:

• Further clarifying the definition of "boycott energy company" to include voting on shareholder proposals that penalize energy companies.
• Removing the word "predominantly" from the definition of "ordinary business purpose" to ensure any pro-ESG action is disallowed.
• Eliminating the inclusion of transaction costs when determining a loss, which Rader stated could "keep delay divestment indefinitely."

Evaluation of the Wording in SB 714

The wording of SB 714, as described by its sponsor, appears to be designed with clarity and precision in mind, aiming to achieve its policy objectives effectively. Below is a detailed evaluation based on available information:

Clarity and Intent

• Transfer of Enforcement Authority: The bill's proposal to shift enforcement from the treasurer to the attorney general is a significant administrative change. This could streamline oversight but may introduce new challenges, given reported tensions between these offices over ESG-related issues, as noted in news reports
• Definition Refinements: The intent to clarify "boycott energy company" by including shareholder voting actions suggests an effort to close loopholes. This is crucial for ensuring consistent application across state entities, as vague definitions could lead to varied interpretations.
• Removal of Ambiguous Terms: Eliminating "predominantly" from "ordinary business purpose" aims to leave no room for ambiguity, ensuring that any pro-ESG action is explicitly prohibited. This reflects a policy stance against ESG influences, aligning with Oklahoma's energy priorities.
• Transaction Costs Provision: The explicit removal of transaction costs from loss calculations is a clear attempt to streamline divestment. By focusing on market performance (current value vs. purchase price) without considering selling costs, the bill ensures that divestment decisions are not delayed by financial justifications.

Potential for Ambiguity

While the sponsor's amendments suggest a focus on clarity, there are indications that some aspects may require further refinement:

• The need to "further clarify" definitions implies that the current language, either in the original Act or the bill, may not be as precise as desired. This could lead to legal challenges if terms are open to interpretation.
• The transfer of enforcement authority could introduce administrative conflicts, especially given criticisms from groups like Heritage Action, which called SB 714 a "dismantling of Oklahoma values" suggesting potential political and operational friction.

Overall Assessment

Based on sponsor statements and legislative summaries, the wording of SB 714 appears to be well-intentioned and aimed at achieving its policy goals. It seeks to ensure that divestment occurs promptly when investments conflict with state policy, particularly regarding energy sector boycotts. However, without access to the full legislative text, it is difficult to definitively assess whether the wording is free from ambiguity or potential legal challenges. The amendments proposed by Rader, such as refining definitions and removing transaction costs, indicate an effort to address these issues, but their effectiveness will depend on the final language.

Impact of Including Transaction Costs on Divestment

Transaction costs refer to the expenses incurred when selling an investment, such as brokerage fees, taxes, and administrative charges. In traditional investment management, these costs are always considered when making sell decisions, as they directly affect net returns. However, in the context of SB 714, the inclusion of transaction costs in the determination of a "loss" has specific policy implications for divestment.

Current Practice and Implications

Under the original Energy Discrimination Elimination Act of 2022, it appears that transaction costs could be factored into the calculation of whether an investment has incurred a "loss." According to Rader, including transaction costs "could keep delay divestment indefinitely.

• If transaction costs of $5 are included in the loss calculation, the net loss might be adjusted to reflect only $15 ($100 - $80 - $5), or it could be argued that selling would result in a greater net loss due to these costs.
• By including transaction costs, state entities might justify delaying divestment, arguing that holding the investment is financially prudent to avoid additional selling expenses. This could lead to a situation where divestment is perpetually delayed, especially if transaction costs are high relative to the loss.

This practice aligns with financial management principles, as transaction costs are real expenses that reduce net proceeds. However, in the context of SB 714, it conflicts with the policy goal of ensuring rapid divestment from companies that boycott energy sectors, as it provides a rationale for inaction.

Effect of Eliminating Transaction Costs

SB 714 proposes to eliminate the inclusion of transaction costs when determining a loss, ensuring that divestment decisions are based solely on the investment's market performance. In the above example:

• Without considering transaction costs, the loss is simply $20 ($100 - $80), and divestment would be triggered based on this figure, regardless of selling expenses.
• This change removes any potential justification for delaying divestment due to transaction costs, aligning with the policy goal of ensuring state funds are not held in underperforming or policy-incompatible investments.

From a policy standpoint, this is beneficial, as it ensures compliance with the Energy Discrimination Elimination Act's objectives. However, from a financial management perspective, ignoring transaction costs could lead to less optimal decisions. Frequent divestment without considering selling costs might increase overall expenses and reduce long-term returns, potentially impacting state retirement systems or other funds.

Long-Term Impact on Divestment

• Expedited Divestment: By removing transaction costs from the loss calculation, SB 714 could lead to quicker divestment from financial companies that conflict with Oklahoma's energy policies. This ensures that state funds are not held in underperforming investments for extended periods, aligning with the bill's intent to protect energy interests.
• Potential for Over-Divestment: On the other hand, ignoring transaction costs might result in state entities divesting too frequently, which could increase costs and reduce returns. This trade-off highlights the tension between policy goals and financial prudence, a key point of controversy in the bill's reception.

Comparative Analysis: Including vs. Excluding Transaction Costs

To illustrate the impact, consider the following table comparing the two approaches:

This table highlights the trade-offs between policy compliance and financial management, a central debate in the bill's implications.

Indian Context and Relatable Examples

While SB 714 is specific to Oklahoma, its themes of divestment and policy-driven investment decisions resonate globally, including in India. For instance, consider Ramesh, a teacher from a small village in Rajasthan, who manages a local cooperative's investment fund. Facing pressure to divest from companies with poor environmental records, Ramesh found that transaction costs often delayed decisions, mirroring the challenges in SB 714. By adopting a policy similar to SB 714—focusing on performance rather than costs—he was able to align investments with community values, inspiring others to prioritize policy over financial hurdles.

Conclusion

The wording of Oklahoma Senate Bill 714, as described, appears to be clear and effective in achieving its policy goals of strengthening divestment requirements, particularly by eliminating transaction costs from loss calculations. This change ensures that divestment decisions are based on investment performance, potentially expediting the process and aligning with the state's energy interests. However, the inclusion of transaction costs in loss determination could delay divestment indefinitely by providing a financial rationale for holding underperforming investments, a practice SB 714 seeks to address.

The bill's approach reflects a policy-driven stance, prioritizing compliance over financial optimization, but it may face criticism for overlooking practical costs. Without access to the full text, the evaluation is based on sponsor statements and legislative summaries, suggesting a need for further analysis once the final language is available. This analysis underscores the balance between policy goals and financial management, a key consideration for stakeholders in Oklahoma and beyond.

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