Attorneys General Challenged SEC Over ESG Ratings

A coalition of 22 state officials claimed ratings agencies improperly use climate predictions to downgrade companies.

Updated on Sept. 29, 2026 in Public Companies

Bold flat-color editorial illustration of a stone column fragment on a steel plinth, representing institutional regulatory oversight. — Twenty-two state attorneys general have petitioned the SEC to investigate whether Moody's, Fitch, and S&P Global use biased ESG factors to downgrade energy firms. AI Illustration. Upload story photo >

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Should credit rating agencies prioritize environmental and social goals in their financial analysis?

Twenty-two state attorneys general have petitioned the SEC to investigate whether Moody's, Fitch, and S&P Global are using speculative environmental, social, and governance (ESG) factors to downgrade fossil-fuel firms. The coalition alleges these credit ratings rely on undisclosed conflicts of interest rather than established financial metrics.

Why it matters

The letter asserts that integrating ESG transition risks into credit ratings forces businesses to align with net-zero agendas, potentially inflating capital costs for energy companies. Operators in heavy industry should monitor this regulatory push as it targets the methodology used to determine their financing rates.

A coalition of 22 state attorneys general challenged the credit-rating practices of three major firms, down slightly from the 23 officials involved in an April 2026 effort. Moody's has previously cited potential climate-related damage estimates as high as $41 trillion on its website.

The players

Moody's Corporation

A dominant global credit rating agency that provides financial intelligence and risk analysis for institutional investors.

S&P Global Ratings

A primary provider of credit ratings and benchmarks that heavily influences market access for corporate issuers.

Fitch Ratings

A major global credit rating firm that competes with Moody's and S&P to provide financial assessments of debt issuers.

U.S. Securities & Exchange Commission

The federal agency responsible for regulating securities markets and overseeing the conduct of credit rating agencies.

The details

The attorneys general contend that pledges by Moody's, Fitch, and S&P to a United Nations-backed group regarding net-zero alignment create material conflicts of interest. Specifically, they point to the use of climate scenarios, such as the Representative Concentration Pathway 8.5 model utilized by Moody's in August 2026, as a flawed basis for lowering credit scores. The coalition is urging the SEC to mandate that agencies publish sector-specific methodologies that strip out these ESG-driven risk factors.

April 2026: Twenty-three attorneys general demanded explanations for ESG-driven downgrades.
August 2026: Moody's released a report employing climate scenarios.
September 29, 2026: A new letter was sent to the SEC by 22 state attorneys general.

Market Landscape

This push marks a direct confrontation with the SEC's oversight mandate for credit rating agencies, which the coalition claims has failed to curb political influence in financial assessment. It follows a persistent pattern of state-level efforts to decouple corporate debt evaluations from non-financial ESG criteria.

Operators in the energy sector should review their current credit rating reports to identify whether ESG transition risk factors are explicitly mentioned as drivers. CFOs should also document these influences to prepare for potential future testimony or litigation involving the agencies.

The takeaway

The dispute over ESG-driven downgrades highlights a growing divide between institutional financial methodologies and state-level policy priorities. Businesses should track how Moody's, Fitch, and S&P revise their transparency disclosures in response to this mounting regulatory pressure.