State treasurers accuse credit rating agencies of favoring Chinese firms despite high emissions

On Oct. 14, state treasurers and auditors from 22 states publicly accused Moody’s, Fitch and Standard & Poor’s of assigning unusually high credit ratings to Chinese companies, arguing that the agencies ignore China’s status as the world’s largest emitter of greenhouse gases.

The officials said the agencies’ methodology relies on outdated climate‑change policies that favor Chinese firms while penalizing U.S. companies. They warned that such bias could reduce returns on billions of dollars that states have invested in publicly traded firms, jeopardizing revenue for roads, schools, fire departments and other services.

In the letter, the treasurers cited a specific case where S&P downgraded U.S. oil and gas companies for ESG‑related risks but granted an A+ rating to two Chinese state‑owned oil and gas firms, claiming they performed better than international peers on ESG standards.

The coalition argues that ratings should reflect objective measurements, including consistent emissions data, rather than vague or inconsistent ESG criteria. By overlooking China’s dominant emissions profile, the agencies produce ratings that the treasurers describe as “nonsensical by any objective standard.”

State officials contend that the current approach harms their portfolios, resulting in smaller investment returns that fund essential public programs. They urged federal regulators to examine the agencies’ rating models for possible bias toward Chinese firms and to ensure that climate risk is incorporated transparently.

The letter did not specify any immediate regulatory actions, but the treasurers indicated they will continue to press for a review and expect agencies to adjust their methodologies to reflect accurate environmental risk assessments.