By Aishwarya Nair and Ross Kerber
(Reuters) -Republican attorneys general from 21 U.S. states on Tuesday wrote to proxy advisory firms Institutional Shareholder Services (ISS) and Glass Lewis, asking whether the companies’ voting recommendations on such issues as climate and boardroom diversity violated duties to clients.
“Evidence regarding climate change advocacy and goals suggests potential violations of your contractual obligations and legal duties,” the attorneys from states including Texas and Utah said in their letter.
They asked both firms by the end of January to answer questions such as how they determined “appropriate” emissions targets.
Republicans have stepped up their criticism of firms that incorporate environmental, social or governance (ESG) goals into their business, arguing that the companies should focus more on investment returns.
At the same time, companies and top asset management firms face pressure from various Democratic state officials to pay more attention to such issues as climate change and workforce diversity, which have also drawn growing interest from investors.
ISS said on Wednesday it would respond to the questions and that its only agenda is to serve clients. “The state attorneys general letter reveals a fundamental misunderstanding of market forces at work,” it said in a statement sent by a spokesman.
Glass Lewis did not immediately comment.
Both firms have faced criticism in the past for the widely followed recommendations they offer investors on how to cast ballots at corporate annual meetings.
But their recommendations remain popular among investors.
Traditionally, most of the criticism has come from corporate executives.
Meanwhile, Republicans have raised concerns over the ESG efforts of BlackRock Inc, the world’s biggest asset manager, saying the focus could impact investor returns.
BlackRock Chief Executive Larry Fink said on Tuesday his company had lost around $4 billion in assets under management as a result of a political backlash against ESG investing in the United States.
(Reporting by Aishwarya Nair in Bengaluru and by Ross Kerber in Boston; editing by Bradley Perrett and Philippa Fletcher)