Ongoing litigation against the state of Missouri over new ESG disclosure rules could determine that ESG investing aims to maximize financial returns, undermining attacks by many Republican officials that ESG investing is contrary to asset managers’ fiduciary duties.
In an article written by IFR, litigation & enforcement partner Rob Skinner commented on Missouri’s recent motion to dismiss.
“It is a concession by one of the red states that ESG investing can be financially material,” said Rob. “It contradicts the underlying premise of most red state attacks, which is that ESG investing is breaching fiduciary duties because it prioritizes social or political agendas over financial returns.”
If the court finds that ESG considerations are related to financial returns, the judicial precedent could be “an important brick in the wall” when defending ESG investing in other lawsuits, Rob added.
Many investors incorporate ESG factors, such as climate risks and human capital, expressly in pursuit of better financial performance.
Rob said he would advise asset managers engaged in ESG investing “to stay the course while making it clear that ESG considerations are in pursuit of financial returns.”
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