The state of Tennessee and BlackRock settled a legal dispute Friday over the company’s alleged false and misleading statements about its environmental, social, and governance investment practices.
Tennessee and BlackRock entered into an agreement that requires BlackRock to increase transparency surrounding its ESG investment funds and act solely in the financial interests of its investors for funds without stated objectives beyond financial performance.
“This resolution assures that the money Tennesseans invest with BlackRock is managed consistent with the funds’ disclosures. While investors are always free to buy cause-oriented products instead of focusing on maximum return, this settlement ensures that only investors who make a knowing choice will see their assets directed toward these non-financial goals,” said Tennessee attorney general Jonathan Skrmetti (R).
“BlackRock’s stringent obligations under this settlement ensure Tennesseans will not see their retirement funds used to support radical ideologies they oppose.”
The settlement did not determine that BlackRock harmed Tennessee consumers or violated the law with its ESG offerings. BlackRock has invested more than $41.7 billion in Tennessee companies and is the world’s largest asset manager.
BlackRock agreed to further disclose its proxy voting practices and implement compliance measures to demonstrate its fealty to the deal, including third-party audits of records showing why its proxy votes are in the best interest of investors. BlackRock is also mandated to ensure its communications with investors are in line with its fiduciary duties and disclose its membership in all climate-focused asset manager organizations. Earlier this month, BlackRock withdrew from the Net-Zero Asset Managers Initiative, causing the group to suspend operations.
“We’re pleased to resolve this matter. BlackRock has consistently acted in the best interests of our clients, and we welcome the opportunity to demonstrate that fact through even greater transparency about our practices,” BlackRock said in a statement.
BlackRock does disclose its proxy voting activity and guidelines on its website. The settlement compels BlackRock to do so quarterly, in addition to disclosing shareholder activity to affected portfolio companies when its funds are acting on objectives besides financial performance.
The settlement comes after a federal judge ruled that American Airlines violated the law by putting employees’s retirement funds into BlackRock investment vehicles that were influenced by ESG priorities. Critics of ESG believe the American Airlines ruling and Tennessee’s deal with BlackRock are both victories against the financial behemoth’s promotion of progressive policies on climate change and social issues.
“Tennessee’s settlement with BlackRock is another historic win for consumers and another blow to BlackRock’s attempt to force ESG policies on Americans,” said Will Hild, executive director of Consumers Research, a watchdog group opposed to progressive corporate activism.
“Thank you to elected officials like Attorney General Skrmetti for continuing to push back on these radical political agendas. Consumers’ Research will continue to fight against ESG elites like BlackRock CEO Larry Fink and others who continue to put politics over fiduciary duty.”