ESG Investment Factors – Adding Value, not Values

New York, NY — District of Columbia Attorney General Karl Racine led a coalition of 17 attorneys general (AGs) in submitting a letter today to the Senate Committee on Banking, Housing, and Urban Affairs and the House Committee on Financial Services regarding the use of environmental, social, and governance (ESG) factors in investment decision-making. The letter details the financial harms of banning ESG-related investment strategies and also warns against greenwashing. It explains that considering ESG factors allows investors to weigh all of the necessary information needed to make informed investment decisions, including in their management of pensions and retirement savings.

“Here’s the truth: considering environmental, social, and governance factors is the best practice of investment professionals throughout the world and the overwhelming majority of trustees in Republican-led states agree,” said AG Racine. “Millions of workers rely on financial experts to help them retire and support their families in their golden years. Thoroughly considering all potential risks before making investment decisions is a fundamental principle of capitalism. These anti-ESG efforts are akin to putting a blindfold on investors.”

“State AGs who are actively working to protect their communities from the harms of climate change are increasingly seeing the impact of those changes on the financial sector,” said Bethany Davis Noll, Executive Director of the State Energy & Environmental Impact Center. “Today’s letter shows a commitment to safeguarding the financial wellbeing of everyday Americans while not losing sight of the dangers of climate inaction.”

Background — On August 4, a separate group of 19 AGs sent a letter to BlackRock expressing concern about the company’s consideration of ESG factors in evaluating investments. And a coalition of AGs has launched an investigation into banks’ ESG practices. Various states also have legislation that is pending or enacted limiting the consideration of ESG in investing.

In April 2022, the Securities and Exchange Commission (SEC) pro­posed climate-related financial risk disclosures as part of an effort to ensure investors were operating with reliable information on climate change. Many of the AGs joining today’s letter on ESG investment factors have made similar points in comments to the SEC, as well as stressed the need for transparency in making these types of financial decisions.

The attorneys general of California, Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, Rhode Island, Washington, and Wisconsin joined AG Racine in today’s letter.

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About the State Energy & Environmental Impact Center:
The State Energy & Environmental Impact Center at NYU School of Law is a nonpartisan academic center at NYU School of Law. The Center is dedicated to working towards a healthy and safe environment, guided by inclusive and equitable principles. The Center studies and supports the work of state attorneys general (AGs) in defending, enforcing, and promoting strong laws and policies in the areas of climate, environmental justice, environmental protection, and clean energy.