State AGs Send Subpoenas, Investigative Demands to Asset Managers on ESG Practices

Over the past month, multiple state attorneys general have sent subpoenas or civil investigative demands (CIDs) to certain asset managers due to their incorporation of ESG factors in investment strategy. These requests focus on participation in certain climate initiatives (Climate Action 100+, Net Zero Asset Managers Initiative, etc.) but also the asset manager’s proxy voting policy on shareholder ESG-focused proposals. A client alert from K&L Gates highlights the complexity of the state AG requests, noting “asset managers should think about jurisdictional questions, especially where they have no place of business or clients in a state issuing the demand.” These investigations by state AGs follow a March 30 coalition letter from 21 AGs to 53 of the top asset managers. The letter highlighted potential conflicts between membership in certain climate initiatives and asset managers’ fiduciary duty to investors. This push against ESG at the state-level was also visible after 25 state AGs filed suit against the Biden administration in an attempt to block a Department of Labor rule that allows fiduciaries to consider ESG factors when choosing retirement investments.

Click here to read a client alert from K&L Gates on the state AG investigations into asset managers’ ESG practices.