(The Center Square) – Five Kentucky Republicans who hold statewide elected offices wrote a letter Wednesday to a credit rating agency criticizing it for including environmental, social and governance factors in deciding credit worthiness for states.
State Treasurer Allison Ball, Auditor of Public Accounts Mike Harmon, Secretary of State Michael Adams, Agricultural Commissioner Ryan Quarles and Attorney General Daniel Cameron signed the two-page letter to S&P Global Ratings and called including such factors in their credit ratings “unnecessarily subjective and political judgments” that may lead to changes based on political whims.
“The core purpose of S&P is to provide objective insights into the financial competencies of each state,” the Kentucky officials said in the letter. “However, this new plan looks more like China’s social credit system and purposefully muddies the waters between objective financial concerns and normative political issues.”
Incorporating such factors in credit ratings could hurt a state like Kentucky, where producing fossil fuels is one of the state’s “signature industries,” they added.
Instead, they want the agency to only use “objective and financial factors” in issuing its credit ratings.
“A reduction in coal, oil and gas production would cause increased unemployment, higher fuel costs and a decrease in overall tax revenue, thereby negatively impacting Kentucky’s overall creditworthiness and causing undue hardship and suffering for the people of this state,” the letter stated.
Last month, S&P issued a statement to investors, issuers and other parties regarding the ESG indicators. It said that not all ESG factors are considered when determining an issuer’s credit grade.
“ESG credit indicators provide additional transparency on what’s already incorporated into our credit rating analysis,” the company said. “They are another step in our efforts to enhance the usability and accessibility of our credit rating reports and related research.”
S&P’s ESG ratings for Kentucky were E-2 for environmental, S-3 for social and G-2 for governance. On a 1-to-5 scale, where 1 is “positive” and 5 is “very negative,” a 2 rating is considered “neutral” and a 3 is “moderately negative.”
The Kentucky officials also objected to the scores themselves in the letter.
“It is easy to discern the significant harm caused by placing subjective and environmental factors ahead of objective financial factors,” they said. “For example, lessening American production of fossil fuels before our country has the infrastructure to support widespread reliance on green energy will only lead to a dependence on the fossil fuels produced by hostile nations and create significant national security risks.”
