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Idaho officials object to new bond rating standards that examine environmental, social metrics

U.S. Geological Survey

Financial officials in Idaho are objecting to a change in the way influential credit ratings agency S&P evaluates the state’s creditworthiness.

A state’s bond rating is important. In essence, it’s like Idaho’s credit score. Traditionally, S&P grades companies and governments on factors such as assets, debt, risk management and policies. The specific criteria and methods are proprietary – which is also the case with the other major credit ratings agencies, Moody’s Investor Services and Fitch Ratings.

But S&P says there’s growing demand from investors who want to know more about how businesses and governments operate on different fronts. This month it rolled out a “report card” for states that included ESG factors. ESG stands for environmental, social and governance. Those criteria look at how the state government affects the environment, handles racial and gender issues, its diversity, labor practices and other qualities.

Idaho officials, including treasurer Julie Ellsworth and attorney general Lawrence Wasden, have lambasted ESG, which they describe as subjective and political.

“The use of ESG criteria invites serious concern about what factors will now be prioritized, how they’ll be evaluated, and by whom,” Ellsworth and Wasden wrote in a statement. “States that don’t go along with these new priorities could see their ratings downgraded, despite being on excellent financial footing. It’s a step in the wrong direction and could cost Idaho taxpayers millions of dollars.”

State officials are also worried that evaluating Idaho through environmental and social lenses will lower the state’s bond rating.

“It is not hard to see how these ESG rating criteria can negatively affect Idaho and our industries,” Ellsworth said in a separate statement.

Earlier this month Ellsworth, Wasden, Gov. Brad Little and others signed a letter strongly objecting to S&P’s use of ESG factors in evaluating the creditworthiness of states.

“Idaho is solvent and should not be penalized by you or any other entity for its sovereign decisions,” the letter read. The letter also took issue with S&P’s implementation of ESG ratings, pointing out that though the state balances its budget and pays its bills on time, the credit agency did not give Idaho – or any other state – a positive rating under the “governance” category.

On its website, S&P says that ESG factors play a “prominent role in creditworthiness,” specifically credit quality and willingness to meet financial commitments.

“ESG factors…have always played a prominent role in creditworthiness and, thus, in our credit ratings – even before the term ESG was coined more than a decade ago,” S&P said.

Ellsworth and Idaho’s senior U.S. Senator, Mike Crapo, will expound on their objections to ESG at a roundtable discussion scheduled for June 7.

Brandon Hollingsworth is your All Things Considered host. He has served public radio audiences for fifteen years, primarily in reporting, hosting and interviewing. His previous ports-of-call were WUOT-FM in Knoxville, Tennessee, and Alabama Public Radio. His work has been heard nationally on Morning Edition, All Things Considered, Here and Now and NPR’s top-of-the-hour newscasts.