A coalition of 20 Democrat attorneys general sent a letter to the Securities and Exchange Commission Thursday looking to counter a narrative from their Republican counterparts around credit ratings agencies and their alleged incorporation of ESG risk factors. The letter, led by New York AG Letitia James, says that the conclusions drawn in an April letter sent to credit agencies by members of the Republican party are “based on factual inaccuracies and distortions.”
A group of Republican state AGs sent letters to Fitch, Moody’s and S&P in April, informing the credit rating agencies that the AGs were probing their downgrades of companies in the fossil fuel industry. While a group of Democratic state finance officials followed with a letter to those agencies in May urging the companies to maintain frameworks for “forward-looking risk,” the original letter was also sent to SEC Chair Paul Atkins.
James and AGs from 18 other states and the District of Columbia said in Thursday’s letter, addressed to Atkins and the agency’s director of enforcement, that Republican state AGs were suggesting “that the SEC should investigate the Ratings Agencies for incorporating climate and energy transition risks into their ratings of issuers,” by also addressing their original letter to the SEC.
“The [Republican] Letter could be read to inappropriately pressure the Ratings Agencies to abandon fact-based ratings methodologies and change their independent ratings of, and ratings methodologies for, oil and gas companies and state issuers,” the Aug. 27 letter said.
Thursday’s letter said the Republican letter used factual inaccuracies “to support the flawed proposition that … climate and energy transition risks are no longer valid concerns.” The AGs said that “by doing so, the Letter ignores the very real financial risks and opportunities posed by climate change and the energy transition.”
“The Letter asserts that the Ratings Agencies downgraded fossil fuel companies by ‘presuming a decades-long climate transition that is not occurring.’ But this thesis ignores important realities about climate change and the energy transition,” the letter said. “Oil and gas companies are highly susceptible to physical risks posed by climate change — risks that are entirely independent of any national policy or political affiliation.”
The Democratic AGs also argued that the Republican letter “paints a grossly incomplete picture of the status of public and private initiatives to address climate change and the energy transition.”
In addition to James and D.C. AG Brian Schwalb, attorneys general from California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, Oregon, Rhode Island, Vermont, Virginia, Washington and Wisconsin signed onto the Aug. 27 letter.
In their April letter to the credit rating agencies and the SEC, a coalition of 23 Republican state AGs argued that the downgrading of credit ratings of fossil fuel companies “materially contravene” the companies stated methodologies. The group of AGs questioned the use of ESG policies in the ratings methodologies and the legality of such use.
Shortly after, a group of eight Democratic state finance officials sent a follow-up letter to Fitch, Moody’s and S&P, stating they were “concerned that recent arguments regarding credit rating practices mischaracterize the role of ratings and would narrow risk analysis in ways inconsistent with sound credit practice and the needs of investors and issuers.”
Andrew Collier, senior director of the “Freedom to Invest” campaign for sustainability nonprofit Ceres, called the Aug. 27 letter “ a breath of fresh air” and said that “markets work best when investors, companies, and independent rating agencies are free to make their own risk assessments without government interference.”
“For the last several years, some state attorneys general have used the power of their office to intimidate, pressure, and harm investors and companies over their consideration of climate risks in decisions — overriding free-market decision-making in the process,” Collier said in a Thursday statement. “These efforts, most recently compounded by a threatening letter to ratings agencies, are intended to force the hands of others through political pressure to achieve their end objectives.”
The Democratic AGs letter is the latest salvo in the narrative war on ESG. Following President Donald Trump’s January 2025 inauguration, Republican state officials wrote to the SEC and Department of Labor pushed for the agencies to develop rules denouncing ESG. Democratic state and local officials followed with a letter to the agencies pushing back against those requests.
Last summer, opposing letters sent to U.S. financial institutions from Republican and Democratic state officials on fiduciary duties led to a rebuke from BlackRock, a recipient of both letters. The asset manager said the letters were increasing the “politicization of pension fund management.”
