The state of Tennessee launched a legal challenge to the investment practices of asset management firm BlackRock, asserting that the company misleads stakeholders with their varying positions and statements on their sustainable investment philosophy.
BlackRock executives often make overtures to the environmental, social, and corporate governance movement, also known as ESG, contending that the firm should take societal matters into consideration when making investments. The lawsuit claims that BlackRock, which manages more than $9 trillion in assets on behalf of clients, violates the Tennessee Consumer Protection Act by falsely conveying certain funds as not influenced by ESG, as well as overstating the extent to which ESG creates financial benefits for investors.
“We allege that BlackRock’s inconsistent statements about its investment strategies deprived consumers of the ability to make an informed choice,” Tennessee Republican Attorney General Jonathan Skrmetti said in a press release. “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 retains membership in entities such as the Net Zero Asset Managers Initiative, which seeks to eliminate carbon emissions in the coming decades, while asserting that the only considerations driving decisions relate to investor returns. “BlackRock has articulated two inconsistent positions: one focusing solely on money and the other focusing on environmental impact,” the office of Skrmetti added in the release. “Tennessee consumers deserve to know which of BlackRock’s statements are a true account of the company’s decision-making.”
BlackRock CEO Larry Fink has previously said the firm would leverage voting power to encourage renewable energy emphases among portfolio companies. He wrote in his most recent annual letter to investors that “climate risk” is an “investment risk.”
Republican states have issued a number of legal challenges to BlackRock and fellow asset managers such as Vanguard, contending that their preference for renewable energy threatens to increase electricity prices for consumers and damage state economies. Skeptics of the ESG movement assert that the framework blends left-wing political and social causes such as decreasing carbon emissions with the corporate mandate to earn profits for investors.
