Hilgers Leads 23-State Coalition Challenging ESG Credit Rating Policies

LINCOLN, Neb. — Nebraska Attorney General Mike Hilgers on April 22 co-led a coalition of 23 states in questioning the lawfulness of environmental, social, and governance (ESG) policies used by three major credit rating agencies, according to a statement from the Nebraska Attorney General's office.

The letter targets Fitch Ratings, Moody's, and S&P Global Ratings, which have pledged to systematically incorporate ESG considerations into credit ratings. State officials allege the agencies have downgraded the credit ratings of fossil-fuel companies based on highly speculative ESG predictions and goals, and that these policies threaten to undermine states' bond ratings as well.

"Credit worthiness should be based on market forces and sound accounting, not the political projects and unfeasible ideas of a few powerful people that are not accountable to voters," Hilgers said in a statement.

The coalition, co-led with attorneys general from Alaska, Florida, and Texas, raises several concerns about potential conflicts of interest and legal violations. The letter notes that while the rating agencies' methodology requires companies to prioritize ESG factors, the agencies simultaneously market ESG-related consulting services, which states argue represents an undisclosed and unlawful material conflict of interest. The coalition also questions whether the policies constitute an antitrust violation or violate state laws against unfair and deceptive trade practices.

The letter requests that the agencies take five specific actions: explain ESG-driven downgrades, withdraw from or disclose ESG commitments, revise sector-specific methodologies, eliminate or disclose ESG consulting conflicts, and certify that internal controls reviews have been conducted. The states warned that failure to comply could lead to enforcement action under state consumer protection laws, antitrust investigations, or referrals to the Securities and Exchange Commission.

Attorneys general from Alabama, Arkansas, Georgia, Idaho, Iowa, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, North Dakota, Ohio, Oklahoma, South Carolina, Utah, West Virginia, and Wyoming also signed the letter. An S&P Global spokesman said the company is aware of the letter but declined to comment further at this time.