Here We Go Again: Red States Continue to Focus on ESG
Summary
On 29 July 2025, 26 state financial officers (from 20 red states plus Pennsylvania) acting through the State Financial Officers Foundation (SFOF) sent letters to 25 large asset managers expressing concern that ESG considerations are eroding traditional fiduciary duty. The letter urges managers to limit stewardship to short-term, material financial issues and lists steps required to keep state business. Authors Robert Eccles and Daniel F.C. Crowley argue this is part of an ongoing political campaign to recast ESG as ideological rather than a legitimate assessment of long-term, material risks.
Key Points
- The SFOF letter contends ESG and long-term risk assessments introduce political ideology into investment decisions and dilute fiduciary duty.
- 26 state financial officers pressured 25 major asset managers to change voting, stewardship and investment practices.
- SFOF recommends passive investors should not use ownership to influence company behaviour beyond short-term material financial concerns.
- Authors argue asset managers assess uncertain long-term risks (eg climate change, AI, geopolitics, demographics) to judge material impacts on value, not to pursue ideology.
- Legal scholarship shows fiduciary duty is not a single, fixed rule; states can demand narrower definitions for assets they control but cannot erase the broader market role of stewardship and risk assessment.
Content Summary
The piece describes the SFOF letter as the latest step in a red-state campaign to define ESG in ideological terms and to limit how asset managers exercise fiduciary responsibilities. Eccles and Crowley push back: assessing ESG is about material, long-term risks that can affect returns. They cite prior calls to focus ESG on financially material issues and reference legal studies showing fiduciary duty varies across contexts. The authors warn that refusing to consider ESG risks may itself breach fiduciary obligations and that politicising these assessments undermines a free-market economy where investors should be free to pursue diverse motives.
Context and Relevance
This matters for asset managers, trustees and corporate boards because state-level restrictions can affect access to public funds and the rules governing voting and stewardship. It sits at the intersection of governance, regulation and partisan politics: as states press narrower fiduciary definitions, managers must balance state demands, legal duties and long-term risk management—particularly for issues like climate change and emerging technologies.
Author style
Punchy — the authors are direct: this isn’t just political theatre, it’s a real pressure on stewardship practices. If you work in asset management, public finance or corporate governance, the note is clear: policy shifts at the state level can force operational changes and reputational risks.
Why should I read this?
Short and frank: it tells you what red states are asking of asset managers and why that could change who gets state business and how you must justify voting and stewardship. Five minutes well spent if you manage money, advise institutional clients, or run corporate governance programmes.