Republican state attorneys general are urging the Securities and Exchange Commission’s Office of Credit Ratings to scrutinize Moody’s, Fitch Ratings, and S&P Global Ratings over alleged use of disputed climate assumptions that could affect fossil-fuel firms and energy-revenue-dependent governments, according to a letter obtained by the Daily Caller News Foundation (DCNF). The coalition is led by Montana Attorney General Austin Knudsen.
Why it matters
Credit ratings assess a borrower’s ability to repay debt. Downgrades can raise borrowing costs and limit investor demand. Moody’s, Fitch, and S&P are SEC-recognized nationally recognized statistical rating organizations (NRSROs) subject to federal oversight.
The new push
DCNF reports the latest letter follows an earlier effort by 23 state attorneys general seeking explanations for allegedly ESG-driven rating decisions. At the time, Louisiana Attorney General Liz Murrill’s office said the coalition was questioning whether the agencies’ ESG policies complied with federal law.
Disputed climate scenarios
The attorneys general focus on an August Moody’s report examining how heat and water stress could affect businesses and financial institutions. They argue Moody’s continued to rely on RCP 8.5—an emissions pathway researchers have described as implausible under current trends—when modeling future risks. Scientists have debated RCP 8.5 for years: authors writing in Nature warned against treating it as a most-likely “business-as-usual” outcome, while other research has described it as a high-end risk scenario rather than a central forecast.
Moody’s, according to DCNF, described RCP 8.5 as one of several modeled pathways used to estimate potential severity of physical climate risks and said its modeling can help insurers, lenders, and investors stress-test exposures. The Moody’s analysis also considered a lower-emissions RCP 4.5 in parts of the report, while using RCP 8.5 for some U.S. water-stress projections.
$41.4 trillion estimate under fire
The coalition also targets a Moody’s estimate that physical climate risks could impose roughly $41.4 trillion in economic losses by 2050. Moody’s describes that figure as a potential global impact equal to about 14.5% of global GDP. DCNF reports the draft AG letter characterized the figure as losses to U.S. GDP. The coalition argues the estimate is compromised because the modeling framework drew from a 2024 Nature paper that was later retracted; the paper’s authors withdrew it after finding sensitivity to data issues and methodological questions.
What AGs want
According to DCNF, the attorneys general ask the agencies to explain or reverse ratings they contend were driven by ESG considerations, publish and consistently follow sector-specific methodologies, and eliminate or disclose certain ESG-related commitments and consulting conflicts to the SEC.
What the law requires
The SEC’s Office of Credit Ratings oversees NRSROs and examines compliance with federal requirements governing methodologies and conflicts of interest. SEC rules require registered rating agencies to maintain procedures for their methodologies and to disclose and manage specified conflicts.
Industry reactions cited by DCNF
“Credit ratings should reflect financial reality, not an ESG agenda,” Jason Isaac, CEO of the American Energy Institute, told DCNF. “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.”
Will Hild, executive director of Consumers’ Research, told DCNF that ratings agencies “continue to rely on ESG-driven metrics,” alleging they ignored calls from state officials to remove such considerations.
No immediate comment
Moody’s, Fitch, S&P Global, and the SEC did not immediately respond to DCNF’s requests for comment.
