Twenty-three Republican state attorneys general sent letters Wednesday to Fitch, S&P Global, and Moody’s demanding answers for what they call illegal, ideology-driven downgrades of U.S. fossil fuel producers based on flawed environmental, social, and governance metrics, Breitbart reports.
The coalition, led by the attorneys general of Alaska, Florida, Nebraska, and Texas, accused the three agencies of violating their own stated methodologies and hiding conflicts of interest that they say are directly tied to United Nations-backed climate commitments.
“The Downgrades materially contravened the Ratings Agencies’ stated methodologies and are consistent with undisclosed material conflicts of interest,” the letter states, noting that all three agencies pledged to the U.N.-backed Principles for Responsible Investment to incorporate ESG “in a systematic way” and that Moody’s and S&P separately committed to helping “achieve” net zero emissions targets.
The AGs argue those pledges required the agencies to make fossil fuel companies appear riskier to investors, regardless of actual financial performance.
“Because net zero requires fossil-fuel consumption to be slashed by over 70 percent between 2022 and 2050, Moody’s and S&P were pledging to use their ratings to increase the cost of capital for fossil-fuel companies,” the letter contends.
The letter catalogs a series of ESG predictions the agencies made that have not come true. Governments have largely retreated from net-zero mandates, not tightened them. The International Energy Agency now projects oil and gas demand will continue rising through 2050. Automakers have written off more than $70 billion in electric vehicle investments. ESG funds are experiencing net outflows, and traditional energy stocks are outperforming the broader market by the largest margin on record.
Despite that track record, the AGs say the agencies kept the downgrades in place and extended the same flawed methodology to state and municipal governments that rely heavily on fossil fuel revenues.
“These failures ripple throughout the economy, reducing fossil-fuel production and contributing to the current high gas prices facing consumers,” the letter states.
The attorneys general demanded the agencies produce documentation justifying each downgrade, withdraw or formally disclose their ESG and net-zero commitments, revise their energy sector methodologies, and certify that internal controls reviews have been completed.
They also warned that prior methodological failures by the same agencies resulted in combined settlements exceeding $2.3 billion and said the legal theories supporting enforcement here are “at least as strong.”
