Sept 16 (Reuters) - Texas Attorney General Ken Paxton on

Tuesday launched an investigation into proxy advisers Glass

Lewis and Institutional Shareholder Services, alleging they may

have misled institutional investors and public companies.

Glass Lewis and ISS, the two largest U.S. proxy advisory

firms, analyze shareholder proposals and corporate governance

issues and provide voting recommendations to institutional

investors ahead of annual meetings.

Their guidance can influence votes on board elections,

executive compensation and environmental or social resolutions.

"Proxy advisors play a massive role in shaping corporate

governance decisions in our country, affecting tens of billions

of dollars," Paxton said in a statement.

He said his office issued civil investigative demands to

both firms to determine whether they violated Texas

consumer-protection laws, including rules on disclosing material

facts.

"Attorney General Paxton's press release mischaracterizes

Glass Lewis's advice and business practices," a Glass Lewis

spokesperson told Reuters in a statement, adding that the firm

provides advice to "highly sophisticated institutional

investors."

"Our clients are not in any way misled."

An ISS spokesperson said the firm was aware of the

announcement and remained confident that it had complied with

all applicable laws.

"(ISS) will vigorously defend itself from any allegations of

wrongdoing," the spokesperson added.

REPUBLICAN PUSH AGAINST ESG

The investigation comes amid a broader Republican campaign

against ESG, with critics arguing companies should prioritize

shareholder returns over social or environmental goals.

Several companies this year have scaled back or ended

diversity, equity, and inclusion programs with U.S. President

Donald Trump having made eliminating such programs a priority.

Texas has been at the forefront of this pushback. In August,

a federal judge issued a preliminary injunction blocking the

Republican-run state from enforcing a first-of-its-kind state

law restricting Glass Lewis and ISS from advising shareholders

on ESG practices.

"Indeed, a federal district court in Texas has enjoined the

Attorney General from targeting Glass Lewis for its

constitutionally protected speech," the Glass Lewis spokesperson

added.

Both firms have long drawn criticism for their influential

voting recommendations, traditionally from corporate executives,

but their guidance remains widely used by institutional

investors.

Supporters say the advisers help investors navigate complex

governance issues, distill lengthy filings and increase

accountability on corporate boards.