Montana AG sues National Association of Attorneys General for investing public funds in ESG

The NAAG is a custodian of the state's public funds and has confirmed that Montana money is included in "special purpose funds" for the public benefit.

By Ben Whedon

Published: June 8, 2023 5:07pm

Montana Attorney General Austin Knudsen on Thursday filed a lawsuit against the National Association of Attorneys General alleging that the organization invested state funds in environmental, social, and corporate governance (ESG) initiatives.

ESG investing involves the use of investor funds by an asset manager to influence the adoption of such practices by the firms in which they invest. Critics of ESG investing contend it may constitute a breach of a firm's fiduciary duty to investors in that it does not seek to maximize their returns.

The NAAG is a custodian of the state's public funds and has confirmed that Montana money is included in "special purpose funds" for the public benefit. Knudsen previously threatened to sue the NAAG in February over its management of state funds, which he contended may have violated state law.

"NAAG holds public money from a series of legal settlements entered by Montana and other States who are (or were) NAAG members," the suit alleges. "In those settlements, the parties agreed to create special purpose funds—totaling over $100 million—for the public’s benefit, and appointed NAAG to administer the funds."

"In fact, in a recent letter to Montana’s Attorney General, NAAG confirmed that assets in the funds belong to Montana and that NAAG is investing the funds on Montana’s behalf," it continues. "To address the inconsistency between NAAG’s actions and what Montana’s laws require, Montana brings this case seeking a declaratory judgment that NAAG and its Chief Financial Officer are subject to the strict accountability requirement of the Montana Constitution and to the requirements of Title 17 of the Montana Code."

"Montana also seeks an accounting to determine what share of NAAG’s assets are Montana’s public funds," it added.

The NAAG is a bipartisan organization, though it has recently faced scrutiny for allegedly shifting to the left in recent years. Knudsen's suit is not the first against the group over comparable concerns, moreover. Utah Attorney General Sean Reyes sued the group in March of this year over the NAAG's custodianship of state funds.

Ben Whedon is an editor and reporter for Just the News. Follow him on Twitter.