Public Pension Trustees Need New Laws to Remember Whose Money It Is

S tates have now passed 31 laws ordering public pension trustees to invest solely for the benefit of plan participants. Oklahoma, Mississippi, and Tennessee joined the list this year, according to Ballotpedia’s August 12 recap of 2026 state legislation on environmental, social, and governance (ESG) investing. Read that sentence again: Legislatures needed to pass a law compelling trustees to do the one thing that trust law already required of them.

I have spent 30 years managing institutional and ultra-high-net-worth capital, writing and enforcing investment policy statements for family offices and pension-adjacent portfolios. In that world, a “pecuniary factor” standard is not a legal term of art dreamed up for a press release. It is the whole job. A financial manager who lets any factor other than risk and return influence an investment decision has stopped being a trustee and become something else — usually a donor spending someone else’s money.

A pension board is not a legislature, and it has no license to act like one. Financial policy asks whether an investment is likely to earn a competitive return at an acceptable level of risk. Social policy asks whether an investment advances a particular vision of how the world should look. Trustees are hired, and legally bound, to practice the first. When a board weighs a company’s board-diversity targets or its emissions trajectory as an investment criterion untethered from any demonstrated effect on returns, it has quietly swapped one job for the other. But nobody voted to make that swap. Elected legislatures set social policy and answer to voters every cycle. Pension boards never face voters. That is why the law confines them to financial policy and nothing else.

Oklahoma’s contribution to this session is the Proxy Advisor Transparency Act, which was signed by Governor Kevin Stitt (R.) and takes effect on November 1. It requires proxy advisors working for Oklahoma’s public funds to align their recommendations with fiduciary duty and disclose how they reached those recommendations, alongside a companion measure that orders pension boards to publish an annual accounting of every proxy vote cast. The Oklahoma Public Employees Retirement System’s own investment policy already states the standard to which its trustees are sworn: The board “shall invest Plan assets solely in the interest of the membership and their beneficiaries, and for the exclusive purpose of providing” benefits. Oklahoma did not invent a new duty. It built an audit trail for an old one.

That audit trail turns out to matter, because a federal court has already shown where the unaudited version leads. In Spence v. American Airlines, a federal judge ruled in January 2025 that American Airlines and its benefits committee breached federal law’s duty of loyalty by allowing BlackRock to cast proxy votes on the airline’s 401(k) assets to advance environmental and governance priorities rather than the plan’s financial interests. The court denied monetary damages in its final judgment on causation grounds (which could still be appealed), but it still ordered governance changes and left the airline covering roughly $4.6 million of the plaintiff’s attorney’s fees. Nobody had to prove the ESG votes cost the plan money. They simply had to prove the votes were not cast for the plan’s benefit. That is a lower bar than most trustees seem to have appreciated.

Ballotpedia counts 31 sole-fiduciary bills enacted or advanced since 2020, alongside 23 anti-boycott measures restricting state contracts with firms that blacklist entire industries. The new wave of proxy-advisor laws, Oklahoma’s included, has already drawn federal court challenges in Kansas, Indiana, and Kentucky, where advisory firms argue the disclosure mandates compel speech. That fight belongs in court and will take years to resolve. It does not address the underlying issue: whether a public employee’s retirement check should hinge on someone else’s political preferences. On that question, the arithmetic and the law point the same direction.

Here is the elevator-conversation version of the case: If a stockbroker started routing part of a client’s account into causes they found meaningful without disclosing why, regulators would call it theft by paperwork. States use a gentler term when a public pension board does so. They call it “governance” — right up until a court calls it something else.

The trustees who resist sole-fiduciary statutes rarely argue out loud for sacrificing returns to ideology. They argue the statutes are redundant, that fiduciary duty already covers the ground, that legislating the obvious insults the profession. They are right that the duty already existed, but they are wrong about what that proves. A rule nobody bothers to write down is a rule everybody is already following. A rule that many legislatures have had to institute is one that enough trustees were violating so that the people footing the bill quit trusting the honor system.

Public pension trustees oversee $6.85 trillion in state and local retirement assets. The people who earned that money are owed one thing from the people managing it: a sound return, not a noble reputation for the trustee on their next conference panel. Nearly two-dozen states have written that obligation into statute because trustees refused to read it from existing obligations. Every state that hasn’t yet passed a sole-fiduciary law is still running the old experiment without a paper trail, and beneficiaries will bear the cost.