Federated Hermes, a champion of environmentally friendly investment strategies, is coming under increasing pressure to explain its sponsorship of a coalition of senior US public officials which opposes action on climate change.

Three Danish pension fund clients of Federated Hermes are demanding to know why it agreed to act as a gold sponsor for the State Financial Officers Foundation — a Republican group which has threatened to remove state pension assets from financial companies that do not support fossil fuel industries.

The foundation, which draws support from senior elected financial officers from 23 US states, has lobbied aggressively against Biden administration policies aimed at slowing global warming and opposed proposals by US regulators to introduce new climate risk disclosure standards for institutional investors.

The clash highlights a tension between approaches to environmental, social and governance standards on both sides of the Atlantic. Support for stricter ESG standards across the corporate sector has been much stronger among investors based in Europe than in the US where opposition to action on climate change is widespread among Republican party supporters.

Federated Hermes has a valuable reputation as a proponent of ESG investing. The Pittsburgh-based fund manager has a highly regarded stewardship team based in London that provides advice on ESG and other shareholder issues to institutional investors with combined assets of more than $1.6tn.

In response to growing criticism of its sponsorship of SFOF, Federated Hermes said last week that the relationship “does not serve as an endorsement of any organisation’s particular perspective on any issue.

“Diversity of thought and respect for the views of others, no matter how they differ from our own, is critical to long-term consensus building and the betterment of our world,” wrote chief executive Christopher Donahue in a statement last week.

Anders Schelde, chief investment officer at the Danish pension fund AkademikerPension, said that the response was “unsatisfactory” as it did not explain why Federated Hermes had chosen to become a gold sponsor of the foundation nor clarify whether the sponsorship would be dropped or reduced in light of SFOF’s anti-climate change statements.

“It just doesn’t add up, in our view,” said Scheld.

Kirstine Lund Christiansen, head of ESG at the Danish pension fund P+, said they had “asked for a more concrete statement from Federated Hermes on how they view the approach to climate of SFOF”.

A third leading Danish pension fund said it was “critical” of the connection between Federated Hermes and SFOF. “We are awaiting a response from Federated Hermes before deciding on any further action,” it said.

Federated Hermes was created in 2018 after Federated Investors bought a majority stake in Hermes in a deal that valued the London-based manager at £410mn.

The acquisition provided Federated with better distribution in Europe and significant expertise in ESG investing which Hermes had developed under its chief executive Saker Nusseibeh, one of the most fervent supporters of environmental investing in Europe’s asset management industry.

In the US, however, opposition has hardened among Republican politicians to work by banks, insurers and investment managers to mitigate climate change risks even as pressure builds on financial organisations from policymakers, regulators and customers for a stronger response to the threats posed by rising temperatures globally.

In an article in The Wall Street Journal in May, Mike Pence, US vice-president under Donald Trump, described ESG as a “pernicious strategy” that enabled “an unelected cabal of bureaucrats, regulators and activist investors to rate companies based on their adherence to leftwing values”.

“We are very concerned about the politicisation of ESG which is taking place in the US as we fear that it may hamper much needed climate action,” said Scheld.

The US asset managers Fidelity Investments and Invesco, which offer ESG funds, are both listed as SFOF silver sponsors. Both firms declined to comment on Tuesday.

Other firms are sticking with SFOF. A spokeswoman for private equity firm KKR said it is still a member. “It is not an endorsement of any policy position, including those around ESG disclosure and management,” KKR said.

Derek Kreifels, head of SFOF, declined to comment about its donors. “We are committed to driving fiscally sound public policy and educating Americans on the role of responsible financial management in a free-market economy,” he said.

As SFOF is a non-profit, it does not need to disclose its financial supporters.

A senior London-based Federated Hermes employee said the relationship with SFOF was “an embarrassment”.

“There are internal discussions about whether it might be possible to find an exit but that has been made more difficult by the negative publicity,” the employee said.

Federated Hermes, Fidelity Investments and Invesco are all signatories to the UN Principles for Responsible Investment, a framework designed to promote a more sustainable planet.

“The PRI expects all signatories to regularly review their commitments to external membership bodies and associations and to ensure any activity in this vein is consistent with signatories’ own commitments to responsible investment,” said Nathan Fabian, the PRI’s chief responsible investment officer.