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Sean D. Reyes
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AG Reyes Joins 23 State Coalition Urging Financial Institutions to Uphold Their Fiduciary Duties in Their Proxy Votes

May 22, 2023

Last week, Utah Attorney General Sean D. Reyes joined Tennessee Attorney General Jonathan Skrmetti and 21 other states in sending a letter to executives of six financial institutions, informing these firms about investigative interest into the relationships with proxy advisory services and the fiduciary duties to clients, pertaining to the Environmental Social and Governance (ESG) movement. 

The attorneys general highlight Glass Lewis and International Shareholder Services (ISS) as two top proxy advisory services that have both committed to base their recommendations on whether a company is implementing net zero emissions goals and related climate commitments. The letter warns the financial companies against allowing these proxy advisory services to control or have undue influence on decisions that affect clients’ financial interests – even when these institutions and/or their shareholders have repeatedly rejected radical environmental proposals from defining their operations or core values. It also expresses concern with the prospects of executives attempting to influence other companies to adopt the radical environmental policies that their own respective organizations rejected. 

As the attorney’s general state in the letter, when financial institutions act as an asset manager on behalf of state pensions, and many other clients, the money is not their own; but these companies owe their clients various fiduciary duties, including loyalty and care, requiring actions made exclusively in the financial interest of their clients, to the exclusion of other motivations and interests. The coalition of attorneys general write that they cannot conceive of a rationale that would justify opposing onerous environmental requirements for their own companies but insisting that the same requirements enhance shareholder value at other firms. 

Earlier this month, General Reyes testified before the House Committee on Oversight and Accountability, speaking on the critically important issue of how ESG factors are distorting the American financial system and harming consumers. His written testimony urged the Committee to investigate the actions of proxy advisory firms due to federal laws that prohibit their recommendations from including false or misleading information. 

General Reyes also led a 21-state coalition back on January 17, 2023, challenging the ESG practices of the two proxy advisory companies that are referenced in the May 19th letter sent by Tennessee’s coalition. 

Joining Utah and Tennessee on the May 19th letter were the states of Alabama, Arkansas, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, New Hampshire, North Dakota, Ohio, South Carolina, Texas, Virginia, West Virginia, and Wyoming. 

Read the letter here.