Fiduciary Duty Fracas: US States Target Asset Managers’ ESG Practices

August 1, 2025

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By Jack Grogan-Fenn

A letter from Republican state officials has demanded that several major asset managers scale their ESG-related investment activities to continue business between the two parties.

The letter was signed by 26 finance officials from 21 Republican-run US states. It cited “deep concern” over the “erosion of traditional fiduciary duty” in American capital markets. The letter arrives amid increasing attempts by US policymakers to derail ESG investment, which has ratcheted up the re-election of Donald Trump as President.

It was reportedly sent to 18 asset managers: Amundi, BlackRock, BNY Mellon, Capital Group, Fidelity Investments, Franklin Templeton Investments, Geode Capital Management, Goldman Sachs, Invesco, JP Morgan, Legal & General, Morgan Stanley, Northern Trust, Nuveen, State Street, T. Rowe Price, Vanguard, and Wellington Management.

The letter sets a September 1 deadline for the asset managers to respond to the letter and “provide clarity and demonstrate [their] commitment to a fiduciary model grounded in financial integrity” rather than “political advocacy”. It details five steps for asset managers looking to do business with the 21 states.

These five requests included “abandoning the practice of framing deterministic future outcomes as long-term risks to justify immediate ideological interventions through corporate engagement or proxy voting”, with the letter citing climate change as an example of this perceived issue.

The state officials demanded a “commitment not to use passive investment vehicles for activist proxy voting or corporate engagement”, as well as “clear and transparent” proxy voting guidelines and stewardship practices that “reflect a singular focus on shareholder value” rather than “environmental or social goals imposed by activists”.

The letter additionally pushed the asset managers to abstain from net zero climate mandates, natural capital frameworks and the EU’s Corporate Sustainability Reporting Directive.

It also stipulated that all affiliations and collaborative initiatives – such as Climate Action 100+ (CA100+), the Glasgow Financial Alliance for Net Zero (GFANZ) and the Principles for Responsible Investment – that “could influence investment strategy or engagement priorities” should be disclosed.

The officials argued that “speculative assumptions about the future” such as the impacts of climate change had “diluted” the clarity around what constitutes fiduciary duty.

“Financial institutions wishing to compete for our states’ business should provide durable assurances that their practices align with these principles.,” the letter read. “We expect detailed evidence that firm’s investment practices, proxy voting and corporate engagement behaviour, and institutional affiliations align with traditional fiduciary standards, as widely understood as short as ten years ago, and comply with applicable state laws.”

Last year, the Republican heads of the US Judiciary Committee sent letters to over 130 companies demanding information on their CA100+ membership, as reported by Minerva Analytics. The letters described CA100+ as a “woke ESG cartel” and alleged that involvement in the group could potentially violate US antitrust laws.

Republican members of the House of Representatives previously wrote to the founders of CA100+ claiming that the organisation’s role in co-ordinating how some companies pursue ESG policies may violate antitrust laws.

Minerva Analytics reported in February that Republican finance officials from 18 states had urged US Securities and Exchange Commission and Department of Labor leaders to prohibit asset and retirement plan managers from considering ESG or DEI factors in investment decisions.

These same 18 states signed this new letter and have been joined by officials from North Dakota, Pennsylvania and West Virginia.

In December, a coalition of 11 US states filed a lawsuit against the so-called ‘big three’ asset managers BlackRock, State Street and Vanguard, accusing them of using their shares in major oil companies to restrict the coal market and harm customers, as reported by Minerva Analytics.

That same month, a report from the Republican-led House of Representatives Judiciary Committee branded the big three asset managers, “blue-state” public pensions and organisations including CA100+, GFANZ and the Net Zero Asset Manager initiative (NZAM) as being a “climate cartel”.

The committee claimed that these parties had “collude[d] to pressure American businesses to commit to ‘net zero’” and “coordinated pressure campaigns to target US companies and demand that they disclose, reduce, and enforce ‘net zero’ climate commitments”.

Between 2021 and January 2025, 44 items of anti-ESG legislation had passed into law in 21 states according to a report earlier this year. Many of these states signed the letter sent to asset managers this week. The report highlighted that a total of 413 anti-ESG legislative proposals were introduced in 40 states during this same period.

The number of anti-ESG laws has since risen to 56 laws in 22 states, with Missouri joining the list this year, according to an anti-ESG state legislation tracker.

The letter sent to asset managers this week cited the January ruling of a Texas Federal judge which determined that American Airlines had violated the Employee Retirement Income Security Act (ERISA) requirement to prioritise the best interests of plan members by allowing ESG factors to influence its employee retirement plans, as reported by Minerva Analytics.

The officials claimed that the case underscored the importance of adhering to traditional fiduciary standard and illustrated “just how far fiduciary standards have splintered”.

The House Committee on Education and Workforce has since voted through a bill which seeks to amend ERISA as part of an attempt to restrict retirement fund managers’ ability to consider ESG factors in investment decisions, as reported by Minerva Analytics.

This letter was not signed by any Texas officials, but it makes a similar threat to the ban that BlackRock was subject to in the state for almost three years. The asset manager was removed from Texas’ blacklist following a paring back some of its environmental goals, and its departures from both CA100+ and NZAM.

Despite Texas not being involved in this letter, it has been at the forefront of the attacks on sustainable investing that have particularly ramped up since the start of Trump’s second spell as President.

Texas has also targeted proxy advisors, with regulation on track to come into effect on 1 September which is due to demand deeper disclosures on voting recommendations as reported by Minerva Analytics.

However, Minerva Analytics reported that proxy advisors have pushed back and are suing Texas, with cases from two separate proxy advisors reportedly arguing that the law was unconstitutional and eroding their First Amendment right to advise clients.

Anti-ESG actions also still lack popularity with investors, with an ever-increasing appreciation that climate risks can have a significant impact on finance. According to data from Minerva Analytics, anti-ESG shareholder proposals averaged just over 2% of votes in favour at AGMs during the first five months of 2025, despite the rising anti-ESG rhetoric in recent months.

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Last Updated: 1 August 2025