The state of Tennessee is suing BlackRock, the world’s largest asset manager, for violating consumer protection laws. The lawsuit is described as the first of its kind and takes the Republican war against ESG investing to a new level.
Tennessee Attorney General Jonathan Skrmetti accused BlackRock of misleading investors about its ESG investing strategy. On one hand, BlackRock claimed funds focused solely on money, while on the other, it also claimed funds focused on environmental impact.
Critics have long attacked ESG — which stands for environmental, social, governance — claiming a focus on these principles goes against the fiduciary 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 the far left and weaponized by the far right.”
“Look, he can’t run from it,” said Hal Lambert, founder of Point Bridge Capital and creator of the MAGA index. “BlackRock is literally the sun in the ESG solar system. If you look at what BlackRock has done, they have pushed this more than anybody else.”
BlackRock said in a statement it will 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.”
Skrmetti’s 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 funds totaling $55 million, a drop in the bucket considering it manages roughly $9 trillion in assets worldwide. However, as anti-ESG rhetoric has ramped up, more managers are liquidating options, including State Street.
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.
