(Article from Registered Funds Regulatory Update, July 2023
For more information, please visit the Registered Funds Resource Center.
Republican Attorneys General from 21 U.S. states threatened to take legal action against major asset managers for prioritizing ESG factors when making investment decisions, thereby signaling their intent to scrutinize the industry during its upcoming proxy season. In a letter provided by the office of Montana Attorney General Austin Knudsen sent to 53 major asset managers, the AGs raised concerns that asset managers are effectively breaching their fiduciary duties by joining organizations, such as the Net Zero Asset Managers Initiative and Climate Action 100+, that encourage members to reduce global emissions. The letter states that the AGs intend to watch fund company votes on proxy proposals related to the environment, abortion, political spending, race, and gender, which would “prioritize political goals over financial interests.” The letter goes on to state that asset managers’ support of coordinated proxy voting motions by organizations, including As You Sow, may run the risk of violating antitrust protections.
The letter was sent to asset managers with $40 billion or more in assets, including BlackRock, Capital Group, Franklin Templeton, Goldman Sachs, Invesco, JPMorgan Asset Management, PIMCO, State Street Global Advisors, and T. Rowe Price. Notably, a spokesperson for Knudsen said Vanguard was excluded because it withdrew from the Net Zero Asset Managers Initiative last December.
The approach for companies and investors to increasingly consider ESG factors has been supported by Democratic leaders, including President Biden, who recently used his first veto to defend a rule on ESG investing. On the other hand, Republicans, many from energy-producing states, have increasingly raised challenges on ESG investing.
Republican Attorneys General Letter (Mar. 30, 2023), available at: https://content.govdelivery.com/attachments/MTAG/2023/03/30/file_attachments/2453301/2023-03-30%20Asset%20Manager%20letter%20Press%20FINAL.pdf.