Four States Launch Lawsuits Against Proxy Advisor ISS Over ESG Policies

Proxy advisory firm Institutional Shareholder Services (ISS) is facing a series of new lawsuits filed by the Attorneys General of Texas, Nebraska, Iowa and West Virginia, alleging that the firm violated consumer protection and deceptive practices laws by promoting ESG and DEI-related policies in its advice to investors.

The lawsuits, which follow a similar suit filed last year by Florida against ISS and its peer Glass Lewis, mark the latest in a series of actions by anti-ESG politicians in the U.S., which has increasingly focused on the proxy advisory firms in the past few months, including  an executive order by President Trump in December directing several U.S. federal agencies to increase oversight of ISS and Glass Lewis over their support for ESG and DEI issues and a warning from SEC Paul Atkins of plans to examine and propose actions focused on the role of proxy advisory firms over the “weaponization of shareholder proposals by politicized shareholder activists.”

In the new suits, the AGs claim that ISS misled investors by marketing its proxy advice as objective, while incorporating DEI, ESG and climate-related considerations that they argue were not tied to financial analysis or investor returns.

Each of the suits also incorporate conflict of interest allegations, including claims that ISS provided ESG consulting services to companies on which it was covering in its research reports to investors.

Several of the suits also claim that ISS failed to disclose that it is “owned by ESG activists.” ISS is owned by international exchange organization Deutsche Börse and growth equity investor General Atlantic.

Texas Attorney General Ken Paxton said:

 “ISS has enormous influence over how billions of dollars are invested and managed across this country, and they have abused that influence in order to push woke ideology. This, in turn, has often resulted in terrible financial advice disguised as ‘progressive’ shifts. I will not allow this woke corporation to smuggle radical, liberal ideology into the companies they advise and hurt our financial system.”

ISS was not immediately available for comment.