LOUISVILLE, Ky. (WDRB) — Kentucky’s banking industry claims Attorney General Daniel Cameron is overstepping his authority by investigating banks’ so-called “ESG” practices, such as commitments to combat climate change.
The Kentucky Bankers Association earlier this month sued Cameron, alleging the Republican Attorney General displayed “amazing and disturbing broad overreach” when he issued investigative subpoenas to six big banks last month.
Cameron’s office sent civil subpoenas to Bank of America, Citigroup, Goldman Sachs, JP Morgan Chase, Morgan Stanley and Wells Fargo demanding information about the banks’ environmental, social and governance — or ESG — policies, particularly the banks’ status as signatories to the Net Zero Banking Alliance.
Led by the United Nations, the alliance is a group of banks who are “committed to aligning their lending and investment portfolios with net-zero emissions by 2050.” Net zero refers to an aspiration that emissions of planet-warming gases such as carbon dioxide, which is caused by burning fossil fuels, will eventually be canceled out by green technology.
“Kentucky’s consumer protection and antitrust laws prohibit companies from engaging in coordinated practices that block certain Kentucky businesses from accessing banking services,” Cameron said in an Oct. 19 news release announcing his bank investigation. “We joined this investigation to ensure Kentucky companies that reject the Biden Administration’s anti-fossil fuel climate agenda have the same financial freedoms as those who accept it.”
The banks who received the subpoenas are not parties to the bankers association lawsuit, though the association represents the industry in the state.
The lawsuit was filed in Franklin Circuit Court earlier this month, but Cameron’s office is seeking to transfer it to federal court in the eastern district of Kentucky.
The bankers association declined to comment. Cameron's office said it is reviewing the lawsuit and will file a response in court.
The banking industry says it's already regulated by a number of state and federal agencies and that Cameron does not have authority to add the oversight.
“Today, it is the ESG-type issues raised by the (Attorney General’s) actions, tomorrow it could be dictating interest rates or hiring practices,” said Ballard Cassady, CEO of the bankers association, in a news release. “Kentucky banks must be allowed to make good business decisions for their bank, their customers and community without worrying about how they relate to broader ideological or political goals.”
ESG practices have become a common consideration for publicly traded companies and their investors, but Republicans have increasingly taken aim at them, saying investment firms should not pursue political goals in how they manage money for clients.
Cameron’s investigation into banks is part of broader probe led by GOP attorney generals in 14 states.
Cameron, who is campaigning for the Republican nomination for governor next year, on Monday disclosed ESG investigations into large investment custodians The Vanguard Group, Inc. and State Street Bank.
In May, Cameron’s office issued a legal opinion stating that investment managers serving Kentucky’s public pension plans would violate their fiduciary duties by taking ESG or “stakeholder capitalism” considerations into account.
“The pensions of Kentucky’s public employees should not be subject to ‘ESG’ investment practices that allow political decision-making to trump sound financial decisions,” Cameron said in a tweet.
