Tennessee Attorney General Jonathan Skrmetti announced the launch of a new lawsuit against investment giant BlackRock, alleging that the firm misrepresented the extent to which it uses ESG considerations in its investment strategies, including in those that do not have a stated sustainability focus.
The complaint states that BlackRock is “deceiving consumers about the company’s extensive commitment to fulfilling ESG aims.”
The consumer protection lawsuit filed on Monday, focused on BlackRock’s use of corporate engagement and proxy voting to achieve climate-related goals, alleges that the firm made conflicting statements regarding the impact of ESG on its decisions, by claiming to be focused solely on financial returns, while its participation in groups such as the Net Zero Asset Managers Initiative (NZAM) and Climate Action 100+ (CA100+) require BlackRock to promote carbon reduction strategies across its portfolios.
In a statement following the launch of the lawsuit, a BlackRock spokesperson said that the firm would “vigorously contest any accusations that BlackRock violated Tennessee’s consumer protection laws,” adding that it “fully and accurately discloses our investment practices and our approach to proxy voting.”
The suit specifies that “BlackRock has falsely conveyed that certain of its funds do not incorporate ESG considerations,” despite its participation in NZAM and CA100+, as well as the firm’s record that “show that ESG considerations in fact drive portions of its investment strategy-including for non-ESG-funds,” and that the firm “overstated the extent to which its ESG aims bear on companies’ financial positioning and performance.”
In a statement announcing the launch of the lawsuit, Skrmetti said:
“We allege that BlackRock’s inconsistent statements about its investment strategies deprived consumers of the ability to make an informed choice. Some public statements show a company that focuses exclusively on return on investment, others show a company that gives special consideration to environmental factors. Ultimately, I want to make certain that corporations, no matter their size, treat Tennessee consumers fairly and honestly.”
BlackRock, as the largest global investment management company, and a leading voice in the investment community on climate change and energy transition-related investment themes, has found itself at the center of a vocal anti-ESG movement by Republican politicians in the U.S., who have accused the firm of following a social agenda, or of “boycotting” and working to harm energy companies.
The U.S. anti-ESG push has seen Florida pull $2 billion in assets from BlackRock’s management, placed on a list of ESG-supporting asset managers subject to potential divestment by Texas, and subject to accusations of “boycotting” energy companies by 19 state Attorneys General, including Tennessee.
The firm even featured prominently in the recent Republican presidential debates, with some candidates accusing BlackRock of pushing an ideological agenda on the U.S. and holding back energy companies from producing oil.
Despite the political pressure, however, BlackRock signaled earlier this year in its release of its 2023 engagement priorities that its engagements with companies would continue to include sustainability-focused topics such as “Climate and natural capital,” and “Company impacts on people,” while also explaining that its engagement strategy is focused on understanding how companies manage risks and capitalize on opportunities, and that it “does not tell companies what to do.” Similarly, in its commentary section discussing its climate-focused engagements, BlackRock stated that “it is not our role to engineer a specific decarbonization outcome in the real economy.”
In the statement from the BlackRock spokesperson, the firm added:
“On behalf of our clients, BlackRock has invested approximately $40 billion in Tennessee, and we are helping more than 600,000 hard-working Tennesseans retire with dignity. We are proud of our contribution and committed to the future in Tennessee.”