Wall Street's biggest credit rating agencies spent years making political bets on an energy transition that never arrived, and taxpayers in at least 17 states are the ones left holding the bill. Now, twenty-two state financial officers are demanding answers.
The October 14 letter went to S&P Global Ratings, Moody's, and Fitch Ratings, and was signed by financial officers from Arizona, Arkansas, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Nebraska, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, Utah, and West Virginia. SEC Chairman Paul Atkins was copied. The complaint runs through years of credit decisions, including ratings that treated American oil and gas production as a growing financial liability.
The officers put the potential cost to states plainly:
"Ratings agencies' use of false ESG predictions harms States' credit ratings and stock holdings, threatening States' ability to pay for roads and schools, as well as pensions for police officers, firefighters, teachers and other employees."
S&P handed Alaska, New Mexico, and Pennsylvania negative credit outlooks in 2021, citing their dependence on oil and gas. Moody's also flagged Louisiana's exposure to the energy industry, assigning the state a high environmental risk score. All four states have something else in common: significant economic activity tied to producing the energy Americans still use.
Five years later, the anticipated retreat from fossil fuels looks considerably less certain. Oil and gas remain major sources of energy, and the International Energy Agency's 2025 outlook projects demand for both increasing through at least 2050 under current policies. For states that collect substantial revenue from energy production, those earlier credit assessments deserve another look.
Those earlier predictions depended heavily on governments following through with ambitious climate restrictions, a number of which never happened, and on research that didn't survive scrutiny. A heavily cited 2024 paper in Nature put a frightening price tag on future climate damage. By December 2025, the journal had retracted it over problems with the underlying data and methodology.
The study projected a 62 percent reduction in global economic output by 2100, a figure that dropped to 23 percent once researchers caught a data error tied to a single country, Uzbekistan. That's a rather spectacular revision to research that made its way into financial risk scenarios, and the letter identifies climate products from S&P and Moody's that the officers say continue to draw on the withdrawn work.
The China example is harder to explain away. S&P lowered ratings for American oil and gas producers partly over climate concerns, then affirmed A+ ratings for two Chinese state-owned energy companies. China is the world's largest emitter by a wide margin, and its state-owned companies are directed by a communist Party government with no meaningful environmental or governance accountability. Evidently, Beijing's energy companies made a better impression.
Utah Treasurer Marlo Oaks acknowledged that S&P dropped its separate ESG indicators in 2023. He said the underlying issue persists:
"Ratings agencies continue to incorporate speculative ‘transition risk’ and ‘physical risk’ assumptions into credit decisions, potentially increasing borrowing costs and harming taxpayers based on politically contingent predictions that have failed to materialize or have been retracted."
The letter demands explanations for those ratings, the continued use of disputed research, and decisions that haven't been reversed. The agencies had not responded to requests for comment when the story was initially reported.
The agencies have spent years making judgments about an energy transition that hasn't gone according to plan. State treasurers are responsible for the public money affected by those judgments.
They have every reason to insist on seeing the math.