BlackRock faces lawsuit over allegedly 'misleading' ESG strategy

Tennessee filed a lawsuit Monday against the world's largest asset manager, BlackRock, alleging it violated consumer protection laws by making "misleading" claims about its so-called environmental, social, and governance strategy.

A press release from Tennessee Attorney General Jonathan Skrmetti's office stated that the "first-of-its-kind" lawsuit seeks to protect consumers from the firm's alleged "false or misleading representations … about the extent to which Environmental, Social, and Governance (ESG) considerations affect BlackRock's investment strategies."

In a recent statement, 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," he added.

According to the lawsuit, the asset manager has made two opposing claims about its investment strategies, stating that it prioritizes return on investments and also claiming it prioritizes investments in firms that align with its "net zero" goals.

"Thus, 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 firm's statements are a true account of the company's decision-making. This enforcement action seeks injunctive relief, civil penalties, and recoupment of the State's costs," the attorney general's office stated.

The complaint argued that prioritizing investments in companies based on their carbon output goals may lead to worse financial outcomes for the asset manager's clients.

"It is thus only fair that consumers know if the hard-earned funds they invest will be leveraged to BlackRock's ESG ends, rather than to maximizing financial returns," the lawsuit contended. "Yet for years, BlackRock has misled consumers about the scope and effects of its widespread ESG activity."

It noted that BlackRock currently manages roughly $9 trillion in investments. The asset manager's massive holdings allow it to pressure companies to align with its preferred agendas, including radical climate initiatives.

"Its holdings are more than the gross domestic product of nearly every country in the world except for the United States and China," the lawsuit read.

A spokesperson for BlackRock told Fox Business, "We reject the Attorney General's claims and will vigorously contest any accusations that BlackRock 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 spokesperson continued. "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."

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