BATON ROUGE, La. — Louisiana State Treasurer John Fleming, M.D., is calling on major credit rating agencies to eliminate the use of environmental, social and governance criteria in credit evaluations, saying the practice could harm Louisiana and other energy-producing states.
Fleming expressed support for a multistate coalition of attorneys general that recently raised concerns with Fitch Ratings, Moody’s Investors Service and S&P Global Ratings over the use of ESG factors in determining creditworthiness.
On April 22, a group of 23 state attorneys general sent a letter to executives at the three major credit rating agencies, criticizing what they described as the increasing incorporation of ESG considerations into downgrades of fossil fuel companies or sectors. The attorneys general argued that such practices could undermine objective financial analysis and negatively affect state economies.
The letter said ESG-driven methodologies may rely on “highly speculative” assumptions that could artificially affect bond ratings, particularly for states with significant energy sectors. It also raised concerns about potential conflicts of interest involving ESG-related consulting services.
“My responsibility is to safeguard the fiscal integrity of our state and ensure that our creditworthiness is evaluated based on sound financial fundamentals, not political or ideological criteria,” Fleming said. “The concerns raised by 23 of our nation’s attorneys general are both valid and urgent.”
Fleming said Louisiana’s economy could be negatively affected if credit rating agencies penalize industries that are important to state revenue and employment.
“Credit ratings should reflect a state’s ability to meet its financial obligations, but when outside entities inject subjective ESG considerations into that process, they risk distorting the market, increasing borrowing costs, and ultimately placing an unfair burden on taxpayers,” Fleming said.
The attorneys general also raised legal questions about whether coordinated ESG commitments among rating agencies, including participation in international initiatives, could violate antitrust laws or state consumer protection statutes.
Fleming said Louisiana remains committed to transparent, market-based financial practices and will continue working with state and national partners to promote fairness in the municipal bond market.
“It is essential that states are not disadvantaged by politically motivated frameworks that fall outside the proper scope of credit analysis,” Fleming said.