A new investment consultant for the trust managing Oklahoma’s tobacco settlement is using the corporate ratings of a private, conservative nonprofit to determine if the $2 billion trust’s investments conform to Oklahoma values.

The TSET Board of Investors hired Colorado- based Innovest this year, dumping longtime investment manager NEPC after a request for proposals. Board Chairman and Oklahoma Treasurer Todd Russ directed Innovest to review each of the trust’s 20 investment managers in what it’s calling an Oklahoma Values Alignment Assessment.

Russ said he doesn’t want the TSET trust paying fees to investment managers who don’t align with the Oklahoma economy or the state’s values. The effort goes beyond what TSET board investors have typically looked at when evaluating the effectiveness of investment managers for the trust fund. It’s another example of Russ bringing so-called culturewar issues into investment decisions on behalf of the state.

Innovest said it was using the corporate ratings of the conservative nonprofit 1792 Exchange to evaluate the TSET investment managers in the values report. Innovest presented preliminary findings at an Aug. 20 board meeting and said it would complete the review when the board next meets in November.

The 1792 Exchange formed in 2021 and said it partners with “leaders and organizations countering ‘woke capitalism’ and with organizations vulnerable to corporations using their size and influence to stifle speech or deny services.” Daniel Cameron, a former Kentucky Republican attorney general who is now running for U.S. Senate, leads the nonprofit.

The nonprofit developed several databases of corporate policies. It grades companies and their boards based on whether it thinks the policies go beyond typical financial metrics. Its Corporate Bias Ratings database has more than two dozen companies based in Oklahoma.

Among the Oklahoma companies the 1792 Exchange deems highrisk are energy companies ONEOK and Williams Cos. Inc. It rates Continental Resources Inc., Devon Energy Corp. and Expand Energy, formerly Chesapeake, as medium-risk.

In many ways, the 1792 Exchange is attempting to replicate from the right the corporate scorecards from groups such as the Human Rights Campaign, which advocates for LGBTQ+ equality and inclusion. The 1792 Exchange appears to downgrade companies in its database based largely on how they fare in HRC surveys.

The 1792 Exchange said Williams was high risk because it scored a perfect 100 on the latest Human Rights Campaign survey. It also criticized Williams CEO Alan Armstrong for serving on the Business Roundtable, which it described as supporting “stakeholder capitalism over traditional shareholder obligations.”

Armstrong stepped down as CEO in July and is now executive chairman; his successor, Chad Zamarin, is listed as a Business Roundtable member.

Russ said the values assessment will be used to grade the TSET trust fund’s 20 investment managers, who oversee the diversified parts of the trust’s portfolio. “When you look at what you’re calling them out for, it says they received a perfect score on the corporate equity index by the Human Rights Campaign,” Russ said at an Aug. 20 board meeting. “First of all, you’ve got to know what the Human Rights Campaign is and is it a fiduciary matter or is that an activist issue?”

Russ said he hoped TSET investment managers don’t have investment philosophies, such as zero-carbon pledges, that could damage the oil and gas industry.

“If that group says, ‘We’re going to exit the carbon industry by 2050 or cut it 50% by 2030’ and we are very big in the energy industry, then I mean the facts and the data say that will harm us from an investment standpoint if we take that position,” Russ said. “So those are the things that we as fiduciaries have to determine.”

Wendy Dominguez, Innovest’s principal and president, told the TSET investor board the assessment is the first time her firm has been asked to evaluate values on behalf of a client.

“We think just even asking them these questions will hopefully change some of that behavior in asset managers,” Dominguez said. “It’ll help us select future asset managers that not only manage money really well, but your fee dollars aren’t going to the organizations that are actively trying to go against your economy.”

She said performance and ability to track index fund performance would still be the top metrics in any analysis. But Dominguez said the fees paid to investment managers should matter too.

“Wouldn’t you rather pay those to somebody who’s more valuesaligned?” Dominguez said.

The preliminary Innovest values report has eight TSET investment managers as high-risk. They include some of the world’s largest financial firms, such as Invesco, PIMCO and UBS.

Aaron Ackerman, an appointee of Gov. Kevin Stitt, said he had no problems with the values assessment.

“I think it demonstrates potential misalignment,” Ackerman said. “I’m not that concerned about the precision of how they came up with high risk, but it really triggers a discussion for us from a fiduciary standpoint, a reputational risk standpoint, all of that.”

Bank of Oklahoma, which is the custodian bank for the TSET fund, is rated as medium-risk by the 1792 Exchange. But Innovest downgraded that to lower risk in its preliminary TSET report. A BOK subsidiary, Cavanal Hill, runs a fixed-income bond fund for TSET.

“Bank of Oklahoma’s CEO signed the CEO Action for Diversity & Inclusion pledge, which includes a commitment to promote DEI, and the company integrates ESG into all of its business practices,” the Innovest report said. “Innovest has upgraded the 1792 (Exchange) assessment from medium risk to lower risk based on the information we know about their investment strategy and company.”

Executives from Bank of Oklahoma are at every TSET Board of Investors meeting and certify that the TSET fund does not have any tobacco industry investments.

Company officials did not respond to a request for comment.

Russ is chairman of TSET’s five-person board of investors, which sets the investment policies and certifies earnings from the $2 billion trust fund for projects and grants. It is a separate entity from TSET’s board of directors.

TSET’s trust fund had earnings of $140.59 million in fiscal year 2025, which ended June 30. That compared to 2024 earnings of $86.84 million.

Paul Monies has been a reporter with Oklahoma Watch since 2017 and covers state agencies and public health. Contact him at (571) 319-3289 or pmonies@oklahomawatch.org. Follow him on Twitter @ pmonies.