HELENA – Montana Attorney General Austin Knudsen led a 22-state coalition of attorneys general in urging the U.S. Securities and Exchange Commission (SEC) to strictly scrutinize Moody’s Corporation, a credit rating agency, after the agency published a report that relies on false environmental, social, and governance (ESG) predictions. Moody’s ESG predictions raise concern under federal law, which SEC-registered ratings agencies are required to follow certain standards and avoid conflicts of interest.
In the letter to K. Scott Davey, acting director of the SEC’s Office of Credit Ratings, Attorney General Knudsen argues Moody’s Corporation pushes false ESG predictions in its August report that threaten to lower the credit ratings of fossil-fuel companies and industry, creating a conflict of interest that is not disclosed to investors, insurers, and lenders. Moody’s report based its heat-and-water risk analysis on RCP 8.5, a worst-case climate scenario that scientists at the World Climate Research Program abandoned as implausible months earlier. Additionally, Moody’s website cites a claim that climate change caused $41 trillion in economic losses, based on a paper that was withdrawn due to inaccuracies.
“Rather than reversing downgrades based on false predictions, Moody’s is relying on an extreme scenario that has been officially abandoned and an extreme scientific paper that has been officially retracted,” Attorney General Knudsen wrote. “This effort to push insurers, lenders and investors towards basing decisions on dire ESG predictions is consistent with undisclosed material conflicts of interest regarding Moody’s ESG-related services, commitments, and goals, including services like the “Net Zero Assessment” that Moody’s suggests can improve credit ratings.”
The letter calls on Moody’s to explain or reverse ESG-driven downgrades; use credible scientific sources; and either withdraw from ESG commitments and eliminate ESG consulting conflicts or disclose those commitments and conflicts as a material conflict of interest.
Attorney General Knudsen joined a letter in April to credit agencies Moody’s Corporation, Fitch Ratings, Inc., and S&P Global Ratings raising similar concerns about ESG predictions and conflict of interest.
Attorneys General from Alabama, Arkansas, Florida, Georgia, Idaho, Iowa, Indiana, Kansas, Kentucky, Missouri, Nebraska, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, West Virginia, and Wyoming joined the letter.
