Dive Brief:
- A coalition of 26 Republican state finance officials sent letters to the top executives at 25 different U.S.-based asset management firms last week, pushing for the firms to “reaffirm … their commitment to traditional fiduciary duty” by ceasing to frame climate change and other “deterministic future outcomes as long-term risks.”
- The July 29 letters went to executives at the “Big Three” asset managers — BlackRock, Vanguard and State Street — along with other high-profile banks, investment firms and asset management arms, including Bank of America, J.P. Morgan Asset Management, Goldman Sachs and Invesco.
- The finance officials, representing 21 states, also urged the asset managers to “abstain” from incorporating net-zero climate commitments, natural capital frameworks and the European Union’s Corporate Sustainability Reporting Directive into their “default investment strategies.”
Dive Insight:
The push against the use of ESG factors, such as climate considerations in investment decisions and proxy engagement, follows Wall Street’s exodus from climate alliances earlier this year, spurred by mounting pressure from Republican-led state probes and changes in federal leadership. Such departures and climate commitment walkbacks have led to some states dropping previous state-level probes into the banks, including in Texas and Tennessee.
The finance officials represent states including Alabama, Louisiana, North Carolina, Oklahoma and Utah. The letter tells asset management firms “seeking to do business” in those states that they should abandon framing climate change as a long-term risk and incorporating net-zero standards. the missive also asks firms to disclose any coalition or collaborative organizations they have memberships in and align proxy voting guidelines “with shareholder value, not environmental or social goals posed by activists.”
“While some firms have recently taken encouraging steps, such as withdrawing from global climate coalitions and scaling back ESG rhetoric and proxy votes, and some states have permitted incremental reintegration, more work must be done,” the letter said. “The number one issue is a recommitment to the foundational principles of fiduciary duty, loyalty, objectivity, and financial focus.”
The officials alleged that the “potential risks” of climate change “are framed as certain and catastrophic to justify forcing companies to take immediate actions that may not align with their long-term business interests.” Similarly, the letters frame issues like net-zero and CSRD incorporation and alignment as relying on “predetermined political outcomes, not fiduciary judgment.”
The other firms who received the July 29 form letter include Affiliated Managers Group, Alliance Bernstein, BNY Investments and Wealth, Capital Group, Dimensional Fund Advisors, Fidelity Investments, Franklin Templeton, Geode Capital Management, MFS Investment Management, Morgan Stanley Wealth Management, Neuberger Berman, Northern Trust, Nuveen, Prudential, Schwab Asset Management, T. Rowe Price, Wellington Management, and Wells Fargo Wealth and Investments.
The state finance officials are seeking a response to their probe by Sept. 1 and have also encouraged targeted investment managers to engage with the offices of the undersigned treasurers, auditors, comptrollers and other state finance officials. According to the July 29 letter, some asset managers have already initiated correspondence with said state officials.
Republican finance officials from Alaska, Arizona, Idaho, Indiana, Iowa, Kansas, Kentucky, Mississippi, Missouri, Nebraska, North Dakota, Pennsylvania, South Carolina, South Dakota, West Virginia, and Wyoming also signed onto the letter.
