Over 20 State Treasurers Warn Agencies Against Using ESG For Deciding Credit Ratings

Twenty-two state financial officers demanded answers Wednesday from America’s largest credit rating agencies over allegedly flawed environmental, social and governance (ESG) policies they warn could threaten taxpayer money, public pensions and state borrowing costs.

The officials, representing 17 states, accused S&P Global Ratings, Moody’s and Fitch Ratings of allowing politically driven climate assumptions to influence credit decisions, according to a letter also sent to Securities and Exchange Commission (SEC) Chairman Paul Atkins. The dispute could carry financial consequences for taxpayers because lower credit ratings can increase government borrowing costs and affect investments held by state pension systems.

“Ratings agencies’ use of false ESG predictions harms States’ credit ratings and stock holdings, threatening States’ ability to pay for roads and schools, as well as pensions for police officers, firefighters, teachers and other employees,” the officials wrote.

S&P Global Ratings, Moody’s and Fitch Ratings did not respond to the Daily Caller News Foundation’s requests for comment by the time of publication.

The letter targets the agencies’ use of “transition risk,” which assesses the potential financial consequences of moving away from fossil fuels, and “physical risk,” which considers economic damage associated with climate change. The officials argued that the agencies relied on predictions about declining fossil fuel demand, aggressive emissions restrictions and climate-related economic losses that failed to materialize or drew on subsequently retracted research.

The National Oceanic and Atmospheric Administration’s billion-dollar disaster statistics faced criticism in January 2024 for conflating rising economic losses with worsening weather. Critics argued that growing populations and increasingly valuable property in disaster-prone areas could drive higher damage totals without necessarily demonstrating that storms had become more severe. NOAA defended its methodology, claiming that increased exposure, vulnerability and climate change all contributed to rising losses.