25 states sue Biden administration over federal ESG policy [Archive] - Debate Policy

Gunny

01-31-2023, 01:36 PM

https://www.thecentersquare.com/national/21-ags-order-new-york-california-investor-companies-to-halt-advancing-esg-policies/article_1b7a55e2-a0e8-11ed-adc5-9376452c43a8.html

(The Center Square) – Twenty-one attorneys general led by Utah and Texas have warned investment advisor companies that their Environmental Social Governance policies appear to violate federal and state law, “punish American companies” and harm their states’ retirees.
The companies put on notice are New York-based International Shareholder Services, Inc., and California-based Glass, Lewis & Co. Both provide proxy voting advice to shareholders, assist with the shareholder meeting voting process, and provide a range of other services.
“It has come to our attention that you have made several commitments that may interfere with your ability to honor your legal obligations,” the AG’s Jan. 19 letter states. “In this letter, we provide evidence of these potential breaches, specifically as they relate to your climate and diversity, equity, and inclusion priorities. We seek written assurance that you will cease such violations and commit to following the law.”

Investment agreements typically require that only economic value be considered when advising clients, the attorneys general note, which are governed by federal law that requires financial recommendations be free from false or misleading information. Because the companies are promoting ESG and recommending clients vote a certain way, against companies that aren’t committed to producing “net zero emissions,” for example, the AGs argue they “may have potentially violated both federal law and their contractual duties.”
“This is compounded by evidence that the two companies may have potentially used misleading practices when advising clients on matters related to their climate agenda,” Texas Attorney General Ken Paxton said. “ISS and Glass Lewis have also pledged to recommend votes on company directors based on certain racial, ethnic, or sex-based diversity factors, which could open companies up to substantial legal liability for unlawful discrimination.”
At issue are ISS’s proxy guidelines, which state it will “generally vote against” relevant directors if they don’t implement “[a]ppropriate [greenhouse gas] emissions reduction targets” that must “increase over time.” Also at issue are Glass Lewis’ shareholder recommendations partially based on a company’s pursuit of “net zero emissions goals.”
ISS promotes “ESG risks and opportunities” on its website’s homepage and has an entire business section devoted to ESG. It states, “ESG solutions enable investors to develop and integrate responsible investing policies and practices, engage on responsible investment issues, and monitor portfolio company practices through screening solutions,” which includes providing them with “climate data, analytics, and advisory services to help financial market participants understand, measure, and act on climate-related risks across all asset classes. ESG solutions also “cover corporate and country ESG research and ratings enabling its clients to identify material social and environmental risks and opportunities.”

Glass Lewis also offers “a comprehensive offering for ESG Climate Risk Mitigation” to keep investors “informed and facilitate their decision-making processes” in the proxy voting process about climate-related issues. It also flags companies it determines are responsible for 80% of global emissions.
The AGs argue their goals are fallacious, pointing to a May 2021 International Energy Agency report, which states that achieving net zero by 2050 is “narrow and requires an unprecedented transformation of how energy is produced, transported and used globally;” and achieving net zero by 2050 translates to an 8% decrease in energy demand for a global economy projected to be twice as large.
“The IEA describes the pathway to net zero as ‘perhaps the greatest challenge humankind has ever faced,’” the AGs argue. “In other words, it is far from certain that any of this will occur. In one of your reports, you repeatedly cite the IEA pathway, yet ignore statements of the pathway’s improbability.”
They also accuse the companies of appearing “intent to punish American companies for being out of step with net zero,” creating a conflict of interest between their company’s interests and clients’ interests, and harming their states’ retirees.
The coalition told ISS and Glass Lewis to immediately halt their “potentially illegal recommendations” and respond to 11 questions.
Joining Utah AG Sean Reyes and Paxton are the attorneys general of Alabama, Alaska, Arkansas, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, New Hampshire, Ohio, South Carolina, Virginia and West Virginia.

The majority of the AGs also sued the Biden administration this month over its ESG policies, which they argue will negatively impact the retirement savings of 152 million Americans..