State Treasurers Warn Firms Against ESG Investing

In a significant escalation of the political backlash against environmental, social, and governance (ESG) investing, a coalition of state treasurers and financial officers from 21 U.S. states has sent a series of formal letters to top executives at some of the world’s largest investment management firms, urging them to halt the incorporation of sustainability and climate-related considerations into their investment strategies, proxy voting, and corporate engagement practices. The move underscores the intensifying national debate over the role of asset managers in addressing climate change and broader ESG-related issues within the American financial system.

The letters, sent to senior leadership at firms such as BlackRock, JPMorgan Chase, Goldman Sachs, Vanguard, Fidelity Investments, and several others, expressed what the state officials described as “deep concern about the erosion of traditional fiduciary duty in American capital markets.” According to the signatories, the trend of integrating ESG and sustainability metrics into investment decision-making reflects a shift toward pursuing ideological goals under the guise of long-term risk mitigation.

The officials argued that such practices may ultimately undermine the financial interests of their constituents. They emphasized that the role of asset managers is to maximize returns based on clear, objective financial metrics—not to advance political or environmental agendas. The group asserted that ESG frameworks, particularly those driven by international agreements or regulations such as the European Union’s Corporate Sustainability Reporting Directive (CSRD), are out of step with traditional investment principles rooted in fiduciary responsibility.

While the letters acknowledged that some firms have taken “encouraging steps” in response to similar concerns—such as withdrawing from high-profile climate coalitions, toning down ESG-related rhetoric, or scaling back on activist proxy voting—the officials maintained that these actions do not go far enough. They issued a firm demand for further realignment of corporate conduct with what they termed “traditional fiduciary standards.”

The letters outlined a series of expectations for firms wishing to continue managing state pension and treasury funds. These included abandoning the practice of treating “deterministic future outcomes” like climate change as justifications for aggressive engagement or proxy activity. According to the letters, climate change is too often presented as a certainty, with associated risks framed as catastrophic and imminent. This framing, the officials argued, is then used to pressure companies into adopting environmental strategies that may not align with their long-term business goals or shareholder interests.

The state officials further demanded that the investment firms refrain from using passive investment vehicles to advance activist causes via proxy votes or corporate engagement. They also insisted that global political frameworks such as net zero targets, natural capital accounting, or the CSRD should not influence investment practices involving U.S. state funds. The signatories stressed that proxy voting and engagement decisions must prioritize shareholder value over environmental or social objectives they believe are being promoted by activist groups.

Another focal point of the letters was institutional affiliations. The officials requested full disclosure of the firms’ participation in sustainable investment alliances such as Climate Action 100+, the Glasgow Financial Alliance for Net Zero (GFANZ), and the Principles for Responsible Investment (PRI). They argued that membership in such organizations raises questions about whether investment decisions are being guided by political motives or global agendas rather than strict financial analysis.

The signatories warned that financial institutions would be expected to provide detailed documentation proving that their practices—including proxy voting behavior and corporate engagement—are consistent with fiduciary standards as they were “widely understood as short as ten years ago.” The letters also reminded firms that their activities must comply with applicable state laws governing fiduciary responsibility and investment conduct.

The action comes amidst a broader national pushback against ESG investing, particularly in states with Republican leadership. Since the election of President Trump, anti-ESG sentiment has gained momentum across the country, resulting in several states divesting from asset managers with climate-aligned strategies, filing lawsuits alleging ESG-related market manipulation, and introducing legislative proposals to restrict ESG investment practices.

By directly challenging major investment institutions and raising the stakes for firms managing public funds, the letters signal a growing determination among conservative state officials to curtail the influence of sustainability frameworks within the financial sector. As the tension between fiduciary duty and ESG integration continues to evolve, the response from Wall Street firms and their future alignment with—or departure from—climate-related financial strategies may play a defining role in shaping the future of sustainable finance in the United States.