Democrat states have written to, BlackRock, the world’s largest fund manager insisting the “true meaning” of fiduciary duty is “long term” policy making, in a move to counter the campaigning of red states demanding investors end their use of ESG criteria.

In a letter signed by 17 chief treasurers, auditors and comptrollers, — among them those from California and Colorado — the Democrat states pushed back on the position of Republican treasurers arguing that investment managers must adopt a long view in their decision making.

“Fiduciary duty, as properly understood, requires—not prohibits—investor consideration of material risks and long-horizon opportunities.

“Institutional investors, including public pension fund are long-term owners. They bear the consequences of unmanaged risks — whether climate-related, governance-related, or supply chain-related — and must ensure that corporations and their boards address such risks with transparency and accountability.”

And in comments aimed at demands that investors cease using their voting power to back ESG policies, the Democrat states write: “Denying the right to engage with these companies is tantamount to severing ownership from stewardship.”

The intervention is the latest episode in which governance has become a focus for the ideological conflict between the MAGA-controlled Republican Party and Democrats. The conflict has ranged across key issues such as sustainability and diversity and inclusion.

When Donald Trump returned to the White House at the beginning of this year the president issued executive order 14151, outlawing DEI programmes at federal. Suppliers quickly followed suit, disavowing their own programmes in a bid to maintain their business links.

The move was so significant eight UK regulators and watchdogs worried about the effect in the UK were forced to respond with a statement affirming their support for “diverse leadership” and “inclusivity” at companies.

They also underlined a commitment to the “long term” management of corporates.

The statement said: “In challenging times the chairs stress that long-term success includes diverse leadership, integrity, inclusivity and stakeholder engagement.”

At the beginning August 21 Republic state treasurers wrote to fund managers giving an ultimatum that they discard ESG as part of their stewardship criteria. The document demanded investors practice “traditional fiduciary duty” that rejects “long-term risk mitigation” that considers climate change or any other “sustainability framework”.

The letter accused the practice of including sustainability elements among fiduciary duties of being “political ideology” and undermining the “clarity” of previous practices.

“That clarity is being diluted under the banner of so-called ‘long-term risk mitigation’,” the letter said, “where speculative assumptions about the future, like climate change catastrophe, are used to justify ideological conclusions today.”

A deadline of 1^st September was set for a response from fund managers if they wish to “compete” for the investment management mandates of 21 states.

This is conflict unlikely to end any time soon leaving investment managers with a difficult path to tread.