Attorney General Bonta Pushes Back Against Republican AG Letter to SEC: Investors Must Have Full Information About Investing Risk Related to Climate Change

Refutes inaccurate assertion that climate and energy transition risks are no longer valid concerns

OAKLAND — California Attorney General Rob Bonta last week joined a coalition of 20 attorneys general in sending a letter to the Securities and Exchange Commission (SEC) in response to an April 22 letter sent by a coalition of Republican attorneys general that criticized the nation's three largest credit rating agencies (Ratings Agencies) for downgrading the credit ratings of companies and governments based on financial risks related to climate change, citing concerns over harm to the fossil fuel industry. In the letter, the attorneys general argue the April 22 letter is misleading, inappropriate, and mischaracterizes the status of government and commercial clean energy and climate initiatives to intimidate the Ratings Agencies and deter them from properly considering all relevant factors when assessing the credit risk of companies. The attorneys general disagree with the premises of the April 22 letter and reject its claims that governments, including California, have changed course and are no longer seeking to combat climate change.  

“From rising sea levels to extreme weather, we know that the climate crisis presents increasing risks to companies and jurisdictions across this country. These risks must be acknowledged — not hidden away because the Trump Administration decides climate change is not convenient to its agenda,” said Attorney General Bonta. “Yet, Republican attorneys general are actively challenging the use of independent, third-party analysis of financial risk based on their own anti-sustainability agendas. I joined a coalition of 20 attorneys general in correcting the record: Climate change is real and both global and state economies are full speed ahead on planning for it — even if the Trump Administration is not. Americans must have accurate information to be able to make informed investment decisions based on our climate reality and risks.”

It is important to consider environmental factors, including climate risks, in credit risk assessments because climate change poses substantial risks to financial markets and investment portfolios, including market-invested retirement funds. These risks include, for example, damage to capital investments from the increasing frequency and severity of extreme weather events. Over the last ten years, the U.S. has experienced 192 severe weather events in which overall damages and costs reached $1.5 trillion.

 THE APRIL 22 LETTER

The April 22 letter, penned by Republican attorneys general from states with significant oil and gas interests, claims that the Ratings Agencies have improperly downgraded the credit ratings of companies in the oil and gas sector and have also given poorer ratings than warranted to states and localities that rely most heavily on oil and gas revenue. The letter incorrectly claims that recent policy changes, especially by the U.S. federal government, mean that energy transition risks are less important. The letter also questions whether California continues to view climate change as an urgent threat requiring a robust policy response, although the answer to that question is clearly yes. The coalition of Republican attorneys general asks the SEC to investigate and asks the Ratings Agencies to explain and revise their methodologies or risk referral to the U.S. Department of Justice. But credit ratings should be based on facts, not threats. As the April 22 letter itself states, “information cannot be independent and objective when it is shaped by political objectives.” 

LAST WEEK’S LETTER

In last week’s letter, the attorneys general argue:

The April 22 letter ignores the very real financial risks posed by climate change and the energy transition: Climate change is real, supported by ample evidence, and has major financial impacts. More than 98% of climate experts agree that climate change is occurring and is caused by humans, and a majority of U.S. voters — regardless of political affiliation — support climate-related policies, including those that could have material financial impacts on public companies. Oil and gas companies are highly susceptible to the physical risks of climate change, irrespective of political boundaries. In ignoring the impact of climate change, the April 22 letter overlooks the significant financial impacts that the physical consequences of climate change have on the fossil fuel industry and their customers across the country. These include direct and residual costs from natural disasters, sea level rise and other weather changes that impact not only the fossil fuel companies, but also consumers and investors.

The April 22 letter paints an incomplete and misleading picture regarding the status of public and private initiatives to address climate change and the energy transition. While U.S. federal agencies have, for the time being, shifted climate-related policies to support the fossil fuel industry, nearly all of the rest of the world continues to pursue emissions reductions and encourage clean and renewable energy as a matter of policy:

• Even with the U.S.’s withdrawal from the Paris Agreement, 194 countries — all but four countries globally — have ratified the agreement and have committed to limiting the increase in the global average temperature to well below two degrees Celsius above pre-industrial levels.
• In June, the United Kingdom set a new target to reduce carbon emissions 87% by 2040.
• Electric car sales accounted for almost 55% of new cars sold in China in 2025, and the country’s oil consumption could decline by 5.5% in 2026 due to higher gas prices and the push towards electric vehicles.

California has not reversed course on climate change but rather is undertaking comprehensive efforts to meet its statutory statewide emission reduction and carbon neutrality goals — an ambitious and aggressive approach to decarbonizing all sectors of the state’s economy.  These efforts include:

• The 100 Percent Clean Energy Act, which sets targets for 60% renewable energy procurement by 2030 and 100% by 2045.
• The Cap and Invest program, which imposes a declining economy-wide cap on greenhouse gas emissions and funds projects that reduce harmful emissions, protect public health, strengthen local economies, and support natural environments.
• The Low Carbon Fuel Standard, a progressive reduction in the carbon intensity of transportation fuels, targeting a 30% reduction below 2010 levels by 2030 and a 90% reduction by 2045.
• Multifaceted carbon management efforts, including programs to support geologic storage of industrial emissions as well as resilient carbon sinks in California’s natural and working lands via carbon removal and sequestration initiatives.

In sending the letter, Attorney General Bonta joins the attorneys general of New York, Colorado, Connecticut, the District of Columbia, Delaware, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, Oregon, Rhode Island, Vermont, Virginia, Washington, and Wisconsin.

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