BlackRock ‘misleading’ investors on ESG strategy, Tennessee lawsuit claims

[Simone Del Rosario]

This lawsuit takes the Republican war against ESG investing to another level.

Tennessee says the lawsuit is the first-of-its-kind. The state is suing BlackRock, the world’s largest asset manager, for violating consumer protection laws. 

Tennessee Attorney General Jonathan Skrmetti accuses BlackRock of making misleading statements to investors about its ESG investing strategy: on one hand claiming funds focus solely on money and on the other focus on environmental impact.

Critics have long attacked ESG – which stands for environmental, social, governance – claiming a focus on these principles goes against the duty to maximize shareholder value. 

The heat on ESG has been turned up so high that BlackRock CEO Larry Fink stopped using the acronym this year, saying it’s been weaponized by both sides. 

[Hal Lambert]

Look, he can’t run from it. I mean, Blackrock is literally the sun in the ESG solar system. And so if you look at what Blackrock has done, they have pushed this more than anybody else. 

[Simone Del Rosario]

 BlackRock says in a statement it’ll vigorously contest any accusations it violated consumer protection laws, adding, “Contrary to the Attorney General’s claims, BlackRock fully and accurately discloses our investment practices and our approach to proxy voting.”

The lawsuit claims “BlackRock has downplayed the extent to which ESG considerations drive its investment strategies across all holdings, even in non-ESG funds.” 

This month, BlackRock shut down two ESG-minded funds totaling $55 million, a drop in the bucket when it manages roughly $9 trillion in assets worldwide. But as anti-ESG rhetoric has ramped up, more managers are liquidating options.

For more than a year, Republicans have led efforts to pull state pensions from managers like BlackRock that invest with ESG in mind; a counter to pressures from the other side of the debate to divest in things like fossil fuels.