Rob Skinner Addresses ESG Fiduciary Duty Litigation in ClimateWire

In a ClimateWire article prompted by a R&G Insights post from litigation & enforcement partners Amy Roy and Rob Skinner, Rob discusses the legal claims recently brought before the New York Supreme Court criticizing investment managers who account for climate risk.

The case, and the theory that asset managers breached their fiduciary duties by including climate-related risks when assessing the financial liability of energy companies “could open up a floodgate of litigation,” said Rob.

“Energy companies themselves freely admit that technological and regulatory changes to address climate change may hurt their share price in the long run,” said Skinner, who is not involved in the New York lawsuit. “Asset managers can hardly ignore those facts.”

The lawsuit, brought by four New York City employees and the nonprofit American for Fair Treatment, argues the three public pension funds that pulled money out of the oil and gas industry in 2021 “breached their fiduciary duties and abused their control” by divesting holdings in what the complaint calls a “misguided and ineffectual gesture to address climate change.”  In February, 25 Republican-led states sued the Labor Department arguing the anti-ESG rule would result in “reduced investment in the fossil fuel industry,” which would reduce state revenues.

Though both the federal and New York cases target environmental investing, Rob noted the litigation over the Labor regulation involved a question of whether the department had the authority to adopt the rule. The federal case did not involve the question of fiduciary duty. Still, Rob said the Northern District of Texas’ decision could support the New York City pension funds’ case. He also noted that Kacsmaryk acknowledged that ESG investing considerations can be raised in pursuit of financial returns — as opposed to solely a social agenda.