American Airlines violated federal law by putting employees retirement plans towards investment companies with environmental, social, and governance products, a judge ruled Friday, marking a major win for opponents of the progressive investing philosophy.
Texas federal judge Reed O’Connor found that American Airlines violated its fiduciary duty of loyalty under the Employee Retirement Security Act by hiring BlackRock to manage its $26 billion 401(k) plan. He did not conclude that American Airlines violated its duty of prudence because the company acted in accordance with industry practices.
O’Connor’s decision followed a four-day, non-jury trial, Bloomberg Law reported on Friday. The group of plaintiffs, led by pilot Bryan Spence, filed a lawsuit in 2023 over the airline arguing that American Airlines violated its fiduciary duty by hiring BlackRock, an investment manager that focuses on political agendas in addition to financial returns.
NR has reached out to American Airlines for comment.
BlackRock routinely points to high returns on its ESG products and its client satisfaction in response to criticism of its investment goals.
“For the reasons explained below, the Court concludes that the facts compellingly demonstrated that Defendants breached their fiduciary duty by failing to loyally act solely in the retirement plan’s best financial interests by allowing their corporate interests, as well as BlackRock’s ESG interests, to influence management of the plan,” O’Connor said.
The ruling is a significant victory for opponents of ESG who consider it to be a politically destructive agenda that harms shareholders and produces inferior returns. Republican politicians and conservative activists, such as Consumers Research executive director Will Hild, have spent years sounding the alarm about BlackRock’s investment approach.
“BlackRock has betrayed the trust of the American Airlines employees whose interests they were supposed to be serving by pushing a harmful ESG agenda that reduced returns for 401(k) participants. This ruling is a vital step in making sure that those workers harmed by BlackRock, not just at American Airlines, but across the country, will be made whole for their losses,” Hild said in a statement to NR.
The increasingly perilous legal environment and political backlash to ESG from conservatives has prompted BlackRock and other large financial firms to scale back their involvement in climate initiatives. Opposition to ESG is likely to intensify with the incoming Trump administration’s promises to unleash American energy abundance and combat progressive corporate activism.
“This decision should put the fear of God in anyone doing ESG investing without the express permission of beneficiaries. Any company, investment manager or fiduciary who has a loss because of ESG investing will be red meat for trial lawyers,” said Steve Milloy, a senior fellow at the energy and environment legal institute.
Earlier this week, BlackRock withdrew from the Net Zero Asset Managers initiative, a United Nations-backed group of international asset managers that support reducing carbon emissions to net-zero by 2050. BlackRock’s move came after several large banks withdrew from a similar climate coalition geared towards achieving net-zero emissions.