Tennessee-Led Coalition of 22 State AGs Sends Warning Letter to Financial Service Providers Committed to “Net-Zero” Emissions

Troutman Pepper

[co-author: Stephanie Kozol]*

On September 13, Tennessee Attorney General (AG) Jonathan Skrmetti sent a letter to members of the Net Zero Financial Service Providers Alliance (NZFSPA) warning that their commitment to support “global net zero greenhouse gas emissions by 2050 or sooner” may violate state and federal law. Specifically, Skrmetti — and the 22 AGs who co-signed his letter — expressed “concerns” that NZFSPA’s commitments “may run afoul of” federal antitrust and state consumer protection statutes. The AGs request that NZFSPA members respond by October 13, providing detailed information regarding their “commitments and related policies.”

NZFSPA is a multinational group comprised of index providers, auditors, stock exchanges, as well as research, rating, and data providers, including some of the largest financial service providers in the world like Bloomberg, Deloitte, EY, KPMG, and MSCI. These member-entities have signed onto NZFSPA’s “commitment” to “help deliver the goals of the Paris Agreement” and “support the goal of net zero greenhouse gas emissions by 2050 or sooner.” The signatories pledge to align their services and products with achieving these goals, set interim targets, engage with stakeholders and policymakers, and publicly report on their progress. Notably, the signatories also pledge to “contribute to Glasgow Financial Alliance for Net Zero (GFANZ) efforts” and “work in coordination with … the Net Zero Bankers Alliance” — both of which have already come under AG scrutiny.[1]

According to the AGs, the companies’ commitment may be unlawful in multiple respects. First, because many NZFSPA members are direct competitors in the financial services market, their commitment could violate federal antitrust law, which generally prohibits competitors from taking concerted action in restraint of trade or commerce, and bars agreements not to do business with certain individuals or businesses. Second, the NZFSPA commitment could violate state consumer protection statutes that broadly empower AGs to investigate unfair or deceptive acts or practices in trade or commerce (UDAP laws). The AGs are concerned that the NZFSPA members’ out-sized market influence could force other companies to comply with their policy preferences and to stop doing business with companies that do not meet NZFSPA standards — particularly those in the energy sector — potentially amounting to a boycott of fossil fuel industries. The AGs also believe that the commitment could harm consumers by artificially restricting the supply of goods and services and inhibiting innovation. Further, the AGs state that the signatories may be misleading consumers about the viability of their “activist climate agenda” and violating consumers’ expectations of “objective and independent[]” financial services.

Why It Matters

The AGs’ letter demonstrates that financial services companies should cautiously approach the decision of whether to join organizations committing such companies to work toward net-zero carbon emissions. Service providers who are already members of such organizations should familiarize themselves with antitrust laws, consumer protection statutes, and regulations to avoid violating any applicable consumer reporting requirements.

[1] See https://www.regulatoryoversight.com/2022/10/texas-ag-joins-wave-of-investigations-into-credit-ratings-companies-esg-data-usage-in-financial-decision-making/; https://www.regulatoryoversight.com/2022/11/banking-group-sues-kentucky-ag-daniel-cameron-over-esg-investigation/.

*Senior Government Relations Manager

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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