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By now, followers of the debate over use of ESG (environmental, social and governance) criteria in investing and business operations are well used to the “E” taking center stage. As we discussed two months ago in this space, a set of 20-plus Republican state attorneys general issued joint warning letters earlier this year to members of the Net Zero Insurance Alliance and the Net Zero Asset Managers Initiative. Both of those groups are organized by the United Nations with the goal of “support[ing] the transition to more sustainable and inclusive economies worldwide.” On September 13, 2023, the same state attorneys general issued a similar letter to signatories of another UN-convened initiative, the Net Zero Financial Service Providers Alliance (NZFSPA).

Among the 26 signatories to the NZFSPA are several household names: all of the “Big Four” accounting firms, Bloomberg, S&P Global, and ratings agencies such as Moody’s and Morningstar. Like the other “Net Zero” climate initiatives, the NZFSPA pledges to support a goal of achieving “global net zero greenhouse gas emissions by 2050 or sooner.”

The letter to NZFSPA signatories has significant overlap with earlier letters to other “Net Zero” initiatives. It raises concerns that NZFSPA “commitments may violate state and federal law, including antitrust laws and consumer protection laws.” On the antitrust angle, the letter notes that some NZFSPA signatories are direct competitors and have “substantial market power.” The AGs sketched out concerns that NZFSPA commitments might cause signatories to restrict production or sales, pressure other companies to adopt those commitments, and avoid doing business with fossil fuel companies. On the consumer protection side, the letter raises the possibility that consumers had been given “insufficient or misleading” information about how the initiative’s commitments would affect the services provided.

The AGs’ letter requests information on 11 topics, including how the commitments have influenced business decisions, how the commitments have affected relationships with other companies, and ways that the signatories deviated from NZFSPA commitments. Recipients of the letter have been asked to respond by October 13, 2023.

So far, state AGs have not followed up their requests for information with regulatory actions or litigation against Net Zero initiative members. It’s safe to say, though, that a pledge to climate goals is subjecting many sorts of financial institutions to scrutiny. Companies and firms that have not been asked to provide information so far should be reviewing their statements and policies on climate change and fossil fuels and considering their potential exposure to regulatory and legal risks.