The Democrats Strike Back: Asset Managers Pushed on “Responsible Stewardship” Commitment

August 26, 2025

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By Jack Grogan-Fenn

In recent months investors have faced what seems to be non-stop letter writing from Republican-led anti-ESG interests, but in a new move 17 Democrat financial officers have written to BlackRock and several other high profile asset managers calling on them to publicly reassert their commitment to responsible stewardship practices.

The officers from 16 Democrat-run states, grouped under the name Americans for Responsible Growth, sent a letter to the asset managers in response to a different letter from a coalition of Republican states which “misrepresent[s] the true meaning of fiduciary duty.”

The letter from Democrat-run states has set a September 1 deadline for the asset managers to respond and to “reaffirm [their] current commitment to responsible stewardship and build a constructive dialogue around this issue”.

Last month the 26 finance officials from 21 Republican states, grouped as the State Financial Officers Foundation (SFOF), wrote to several major asset managers demanding that they scale back their ESG-related investment activities to continue to compete for business within the states.

Though BlackRock was the institution named in the published version of the letter, it has reportedly been sent to 18 total asset managers, including JP Morgan, State Street and Vanguard. Most of the asset managers the letter from the Democrat financial officials was sent to also received the letter from the coalition of Republican states.

As reported by Minerva Analytics, the red states’ letter cited “deep concern” over the “erosion of traditional fiduciary duty” in American capital markets. The letter from the Republican-run states set a September 1 deadline for the asset managers to respond and “provide clarity and demonstrate [their] commitment to a fiduciary model grounded in financial integrity” rather than “political advocacy”.

According to the letter from the Democrat states, the SFOF’s framing of fiduciary duty would require asset managers to adopt a passive approach to oversight while “ignoring the nature of long-term value creation in modern capital markets”.

“We believe that fiduciary duty calls for active oversight, responsible governance and the full exercise of ownership rights on behalf of the workers and retirees we serve,” the letter read. “Fiduciary duty, as properly understood, requires — not prohibits — investor consideration of material risks and long-horizon opportunities. Institutional investors, including public pension funds, are long-term owners.

“They bear the consequences of unmanaged risks — whether climate-related, governance-related, or supply chain-related — and must ensure that corporations and their boards address such risks with transparency and accountability,” it added.

The letter also stated that it was “particularly unreasonable” to suggest that asset owners whose “portfolios span the entire economy” should be prevented from engaging with the largest firms in the market. The top 100 companies currently represent more than 70% of US market capitalisation, meaning that for most institutional investors these holdings are “structurally inescapable”.

“Denying the right to engage with these companies is tantamount to severing ownership from stewardship,” the letter stated.

The coalition has specifically called for the asset managers to reaffirm commitment to responsible stewardship of public pension assets, expand proxy voting opportunities for institutional clients, develop enhanced tools connecting capital to oversight and directly meet with the offices of the coalition to showcase their commitment.

“We commend asset managers who are expanding opportunities for clients to vote proxies,” the letter added. “We urge you to focus on empowering institutional investors and uphold an approach to fiduciary duty grounded in transparency, accountability, and long-term value creation. It is essential that you lead in developing tools and mechanisms that connect capital to oversight.”

The 16 Democrat states represented in the letter were California, Colorado, Connecticut, Delaware, Illinois, Maine, Massachusetts, Maryland, Minnesota, Nevada, New York, New Mexico, Oregon, Rhode Island, Vermont and Washington. These Democrat states represent more than U$3 trillion in pension fund assets, while the 21 Republican states account for fewer than U$2 trillion in assets.

“True fiduciary duty demands active oversight, not passive neglect of long-term risks that could devastate retirement security,” said Brooke Lierman, State Comptroller of Maryland, in a statement. “Asset managers must choose whether they will stand with working families and retirees who need long-term value creation, or whether they will cave to political pressure and abandon their most basic responsibilities.”

Political pressure on ESG-linked investment and responsible and sustainable stewardship has rapidly ratcheted up since the re-election of Donald Trump for a second term as US President. The 21 Republican states involved with the SFOF have all signed and enacted at least one anti-ESG law since 2023.

The letter from the SFOF set out five steps for asset managers looking to do business with the 21 states. This included 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”.

Republican states have increasingly targeted proxy advisors alongside asset managers. Texas, which has led the charge on anti-ESG efforts by Red states, is set to implement regulation on September 1 demanding deeper disclosures on voting recommendations from proxy advisors as reported by Minerva Analytics. However, Minerva Analytics reported that proxy advisors have pushed back and are suing Texas. One of these cases is due to commence later this week, on August 28.

Minerva Analytics reported in February that Republican finance officials from 18 states, as of which are part of the SFOF, 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.

The 21 Republican states involved with the SFOF are also among the 23 that sent a letter to the Science Based Targets initiative (SBTi) earlier this month warning that its Financial Institutions Net Zero Standard risks “violating federal and state antitrust laws as well as state consumer protection laws”.

As reported by Minerva Analytics, the letter stated that agreements made by companies as part of initiatives to reduce emissions, such as the SBTi, “may violate Federal and State laws”.

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Last Updated: 26 August 2025