Tennessee’s lawsuit stems from what the state sees as conflicting statements BlackRock recently made on ESG’s influence over the firm’s business decision. As a result of joining ESG coalitions such as Net Zero Asset Managers Initiative and Climate Action 100+, BlackRock is required to implement carbon-reduction tactics into its investment strategies. Attorney General Jonathan Skrmetti, however, says that on other occasions BlackRock has ensured its customers that the only consideration driving its investment decision is return on investment.
“Some public statements show a company that focuses exclusively on return on investment, others show a company that gives special consideration to environmental factors,” Skrmetti said in a statement. “BlackRock has articulated two inconsistent positions: one focusing solely on money and the other focusing on environmental impact. Tennessee consumers deserve to know which of BlackRock’s statements are a true account of the company’s decision making.”
Tennessee also claims BlackRock misled investors in a statement regarding the impact that ESG has on the firm’s financial performance. The state claims that BlackRock informed its customers of financial benefits that ESG funds provide to its investors. The firm’s website, however, states that ESG considerations do not inevitably affect the firm’s financial standing, according to the Tennessee lawsuit.
BlackRock Disputes the AG’s Claim
BlackRock disputed Tennessee’s claims and stated that the firm has been completely transparent regarding its investment practices. “We reject the Attorney General’s claims and will vigorously contest any accusations that BlackRock violated Tennessee’s consumer protection laws,” a BlackRock spokesperson told FOX Business. “Contrary to the Attorney General’s claims, BlackRock fully and accurately discloses our investment practice.”
Companies and investors are increasingly considering ESG factors, such as climate change and workforce diversity, when making investment decisions, and regulators have pushed investment firms to do a better job of communicating ESG considerations in investment decisions and investment products. BlackRock has also received disapproval from those in some circles for its support of ESG investments.
Republican state attorneys general, like Skrmetti, have voiced criticism of ESG investing under the belief that it directly conflicts with a firm’s fiduciary duty to act exclusively in the best interest of their clients. Earlier this year, Skrmetti and twenty other Republican state attorneys notified asset managers, such as BlackRock, of their concern regarding what they see as an inherent conflict between ESG investing and the firm’s duty to its clients.
Other state AGs have also pushed back on firms such as BlackRock for their ESG strategies. The state treasury of Florida, for example, has divested $2 billion in assets from BlackRock.
When BlackRock signed onto Climate Action 100+, it published a letter stating that it would continue to “independently exercise its fiduciary duties” to clients, which extended to “proxy voting and engagement with issuers on investment stewardship topics, including climate change.”
Jacob Horowitz is contributing editor at Compliance Chief 360°