Tennessee Attorney General Jonathan Skrmetti on Monday sued BlackRock, claiming the investment management firm made “false or misleading representations” to consumers about the extent to which environmental, social and governance considerations affect its investment strategies.
The lawsuit, which was filed in state court, claims that for years, the $9.1 trillion firm misled consumers about the scope and effects of its ESG activity, as well as released conflicting statements regarding ESG’s influence over its business decisions.
Despite marketing many of its funds as devoid of ESG considerations, the firm is a member of ESG coalitions such as the Net Zero Asset Managers Initiative and Climate Action 100+, organizations which “demand sweeping ESG commitments,” according to the complaint.
“We allege that BlackRock’s inconsistent statements about its investment strategies deprived consumers of the ability to make an informed choice,” Skrmetti said in a statement on Monday. “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.”
The lawsuit also accuses the firm of aiming to appease both pro-ESG organizations and investors solely seeking financial returns.
“BlackRock appears to have settled on a strategy of telling both sides what they wanted to hear, in an effort to keep everyone's business,” the complaint alleges.
The state of Tennessee is seeking injunctive relief, civil penalties and recoupment of the state’s costs, according to the complaint.
In a statement, BlackRock said it rejects the attorney general’s claims and will “vigorously contest” any accusations that it violated Tennessee’s consumer protection laws.
“Contrary to the attorney-general’s claims, BlackRock fully and accurately discloses our investment practices and our approach to proxy voting,” the firm told the Financial Times.
The lawsuit comes as BlackRock CEO Larry Fink has faced backlash from both conservatives and liberals over the firm’s ESG policies.
New York City Comptroller Brad Lander accused the firm of caving in to a “misinformed and shortsighted war against ESG at the behest of special interests,” following a report that showed the firm voted in favor of just 7% of ESG-related proposals at company annual meetings in the 12 months to June, the FT reported in August.
Meanwhile, Fink, a republican, said in June he would stop using the term “ESG,” claiming it had become too politicized.
"I don't use the word ESG any more, because it's been entirely weaponized ... by the far left and weaponized by the far right," he said at the Aspen Ideas Festival, according to Reuters.
The asset management firm, along with Glass Lewis, State Street and Institutional Shareholder Services, has also been subpoenaed by House Judiciary Chairman Jim Jordan, who is seeking documents that help answer the committee’s inquiry into if the firms’ climate-related efforts violate federal antitrust laws, according to Bloomberg.
