The State AG Report

Editors Lori Kalani and Jerry W. Kilgore

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ESG Issues Remain Front and Center for AGs and Congress

By: Emily Yu

Utah AG Sean Reyes and Alabama AG Steve Marshall testified at a recent House Committee on Oversight and Accountability hearing, reinforcing that AGs continue to take serious interest in the impact of ESG-based investing.  At the hearing, titled “ESG Part I: An Examination of Environmental, Social, and Governance Practices with Attorneys General,” the Republican AGs made clear their belief that the advancement of ESG issues by global alliances is:

  • Hurting consumers by raising energy prices, depleting the energy supply, and reducing America’s energy independence;
  • Creating a national security risk by increasing dependence on internationally-manufactured renewable energy materials; and
  • Potentially reducing competition by restricting investment in certain industries.

The AGs called on the Committee to investigate: (1) the role of asset manager utility agreements, (2) the influence of proxy advisory firms in promoting ESG-based investing, and the deference that investors give to those recommendations, and (3) the recent U.S. Department of Labor rule allowing fiduciaries under the Employee Retirement Income Security Act of 1974 (ERISA) to consider ESG factors in investment decision-making.

Other topics that the AGs discussed during Q&A with Committee members included the necessity for asset managers to disclose whether they have signed ESG pledges, and the impact of ESG-based investing—including banning ESG-based investing—on investors’ returns.

No Business Is Immune From AG Scrutiny Into ESG

Based on the discussions at the hearing, ESG issues seem likely to remain at the forefront of Congress’ and AGs’ minds, and businesses should stay tuned in.  Notably, although the insurance industry had not previously been in AGs’ sights, a few days after the hearing AG Reyes and Louisiana AG Jeff Landry announced that they, along with a group of 21 other Republican AGs, have sent a letter to the Net-Zero Insurance Alliance warning insurer members that their ESG-related requirements may violate federal and state antitrust and insurance laws, among other laws.  No business will be immune from AG scrutiny into its ESG activities as the size and scope of AG interest continues to expand.