State Officials’ Letter to Asset Managers

Summary

California Controller Malia Cohen and Treasurer Fiona Ma, joined by 15 other state financial officers, sent a collective letter to asset managers pushing back against a July 2025 letter from the State Financial Officers Foundation (SFOF). The signatories argue that fiduciary duty requires active stewardship — voting proxies, engaging companies and addressing long-term, material risks such as climate, governance and supply-chain issues — rather than a passive hands-off approach.

They say the SFOF letter misrepresents fiduciary duty by discouraging engagement, which is impractical for institutional investors whose portfolios necessarily include the largest firms (the top 100 comprise more than 70% of US market capitalisation). The states commend managers expanding client voting options, urge tools that connect capital to oversight, and request a response and meeting by 1 September 2025 to reaffirm commitments to responsible stewardship.

Key Points

State officials dispute the SFOF view that fiduciary duty prohibits active oversight; they say fiduciary duty requires engagement.
Fiduciary duty properly understood permits consideration of material, long-term risks and opportunities (climate, governance, supply chains).
Institutional investors are long-term owners and bear consequences of unmanaged risks, so they must ensure corporate transparency and accountability.
Asset owners and managers should retain and use proxy-voting rights and engage companies to secure durable, risk-adjusted returns.
The top 100 US companies represent over 70% of US market capitalisation, making engagement with large firms unavoidable for many investors.
The letter asks asset managers to empower institutional investors with voting options and stewardship tools, and invites a response and meeting by 1 September 2025.
Signatories include senior state treasurers and comptrollers from California, Colorado, Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, Minnesota, Nevada, New York City, New Mexico, Oregon, Rhode Island, Vermont and Washington.

Content Summary

The letter frames a competing interpretation of fiduciary duty: rather than a narrow focus on short-term financial metrics that discourages engagement, fiduciary duty should be interpreted to require active stewardship and long-term oversight. The states argue that ignoring material risks is inconsistent with serving workers and retirees. They specifically call for asset owners and managers to exercise voting rights, engage with the largest firms, and develop mechanisms that link capital to corporate accountability. The note closes by requesting a timely response and a meeting to build constructive dialogue.

Context and Relevance

This matters for pension funds, asset managers, corporate boards and anyone tracking corporate governance. The letter is part of an ongoing debate about the scope of fiduciary duty and the role of investors in managing systemic risks (notably climate). With equities increasingly concentrated in mega-cap firms, the states’ position strengthens the argument that active stewardship is both unavoidable and necessary for long-term savers.

Author style

Punchy — the signatories make a direct, forceful case that stewardship is essential. If you work in asset management, pensions or governance policy, the arguments here should trigger action or at least a close read.

Why should I read this?

Because this is the states telling asset managers to stop hiding behind a narrow legal reading and actually use their votes and influence — short version: if you care about pensioners, portfolio resilience or how big firms are run, this changes the debate. We skimmed it so you don’t have to — but you should read the full letter if you run or advise institutional capital.