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Montana Attorney General Austin Knudsen and 21 other Republican AGs demand the SEC investigate Moody's, Fitch, and S&P over alleged ESG-driven ratings that harm fossil fuel states.
Montana Attorney General Austin Knudsen and 21 other Republican attorneys general have demanded that the Sec urities and Exchange Commission's Office of Credit Ratings investigate three major credit rating agencies for allegedly punishing fossil fuel states. The request targets Moody's Corporation, Fitch Ratings, Inc., and S&P Global Ratings. The other states joining the demand include 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.
ESG Ratings Under Scrutiny
The attorneys general allege that the rating agencies downgraded fossil-fuel companies, industries, states, or municipalities based on highly speculative environmental, social, and governance predictions and goals. They argue that credit ratings assess a borrower's ability to repay its debts, meaning a downgrade can increase borrowing costs and make bonds less attractive to some investors. The officials say the rating companies still use ESG predictions. Incorporating those ESG predictions can harm fossil fuel energy companies, states, and industries that depend on energy revenue.
A report issued by Moody's in August 2026 demonstrates the rating agencies' continuing reliance on false ESG predictions, according to the attorneys general. They say this materially contravenes stated methodologies and is consistent with undisclosed material conflicts of interest. In the report, Moody's estimates heat-and-water risks to industry in states based on an extreme climate scenario that was abandoned months earlier because of its implausibility, known as the Representative Concentration Pathway 8.5 scenario, or RCP 8.5.
Despite the scenario's implausibility, Moody's report urged investors, insurers, and lenders to stress-test exposure in light of estimated risks from RCP 8.5. Moody's website also cites a $41 trillion damage estimate based not only on the implausible RCP 8.5 scenario, but also on a paper that was retracted due to serious errors.
Retracted Study Fuels $41 Trillion Estimate
Moody's continues to estimate staggering $41 trillion losses to U.S. GDP, but that estimate relies on another climate paper that was withdrawn due to fatal errors. A widely publicized 2024 study warned of devastating economic losses from the physical effects of climate change, much like the implausible RCP 8.5 scenario. Other scientists quickly flagged serious issues with the 2024 study, and those exposed flaws led to the study's retraction.
However, even after the retraction, the Network of Central Banks and Supervisors for Greening the Financial System, known as NGFS, used the retracted study as the basis for its widely used Phase 5 damages model. Moody's $41 trillion estimate is built on the Phase 5 model, which in turn relies on the retracted study, and Moody's estimate also uses the implausible RCP 8.5 scenario. Moody's continues to prominently feature its $41 trillion estimate on its site, despite the fact that the estimate uses two abandoned or retracted climate projections. This once again demonstrates Moody's ongoing contravention of stated methodologies and undisclosed material conflicts of interest related to ESG, according to the attorneys general.
The coalition argues that when rating agencies rely on implausible climate scenarios and retracted studies to influence credit decisions, they undermine the integrity of the ratings investors depend on and can drive up the cost of capital for American energy producers. The SEC's Office of Credit Ratings is now being asked to examine these practices.
Bipartisan Pushback on ESG Credit Ratings
The demand from the 22 Republican attorneys general reflects a broader pushback against the use of ESG factors in financial decision-making. They contend that such ratings penalize states and industries that rely on fossil fuel production, leading to higher borrowing costs and reduced access to capital. The attorneys general say the rating agencies' continued reliance on speculative climate models and retracted research violates their own stated methodologies and raises concerns about undisclosed conflicts of interest.
Moody's, Fitch, and S&P Global Ratings have not publicly responded to the demand. The SEC's Office of Credit Ratings has not announced whether it will open an investigation. The outcome could have significant implications for how credit rating agencies incorporate ESG factors into their assessments and for the cost of capital for energy-producing states and companies.
Moody's SEC ESG Ratings Fossil Fuel States Austin Knudsen Credit Rating Agencies RCP 8.5
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