BlackRock is facing a legal warning from Mississippi in the form of a cease-and-desist order over its ESG policies, the latest salvo from Republicans in a multiyear battle with the firm.
The order, issued by Mississippi Secretary of State Michael Watson on Wednesday, accused BlackRock of making “fraudulent statements, omissions, and other misrepresentations” about its environmental, social, and governance strategies. The order comes a week after Texas announced a major divestment from the world’s largest money manager.
In the 29-page cease-and-desist letter, Watson said that the misinterpretations in question relate to BlackRock “pushing” ESG factors on portfolio companies. He argues that many of the money manager’s practices “would operate as a fraud or deceit” on investors in Mississippi.
“Investment companies will not push their political agenda on Mississippians, especially through fraudulent and deceptive means,” Watson said in a separate statement announcing the cease and desist. “All citizens should have the opportunity to make informed and educated decisions when investing their hard-earned money. If not, our office will hold these bad actors accountable.”
Republican-led states are years into a war against BlackRock and ESG more generally. ESG is a financial concept that centers on compelling social change through investment and divestment. It is a corporate model that doesn’t solely look at maximizing profit but also incorporates other elements into financial decisions — for instance, how an investment might affect fossil fuel emissions.
Republican state officials contend that ESG practices run counter to the traditional investment model of working to maximize shareholder value. They also have argued that firms like BlackRock and some of the big banks have worked to use ESG strategies to indirectly “blacklist” fossil fuels, firearms, and other disfavored businesses.
BlackRock is pushing back on the Mississippi order, though.
“Many policymakers and government officials have ideas on how we should invest our clients’ assets,” the firm said in a statement. “We are always bound to invest consistent with our clients’ choices, their best financial interests, and applicable law. Our only agenda is maximizing risk-adjusted returns for the funds our clients choose to invest in.”
In a phone call, a spokesman for BlackRock told the Washington Examiner that several of the contentions laid out in the cease-and-desist order are inaccurate. The spokesman emphasized that all the money manager does is “in the best financial interest to clients.”
There has been a noticeable shift from BlackRock amid the recent pushback. For instance, in 2020, CEO Larry Fink’s much-anticipated annual letter focused on climate change, saying the matter was becoming a “defining factor” in BlackRock’s assessment of companies.
But in Fink’s latest annual letter released this week, he endorsed “energy pragmatism.” He said that strategy entails both investing in clean energy technologies to reduce carbon emissions and funding traditional energy sources, like fossil fuels, to protect energy security.
Also, in an annual report released last year, it was revealed that the money manager supported just 7% of nearly 400 shareholder proposals on ESG-related matters. That is a marked shift. BlackRock supported nearly a quarter of such proposals in the previous cycle and 47% of environmental and social proposals the cycle before that.
GOP states have gone after BlackRock several times in the past. Last week, Texas State Board of Education Chairman Aaron Kinsey notified the firm that the state was pulling some $8.5 billion in investments from BlackRock over its ESG policies.
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“BlackRock’s dominant and persistent leadership in the ESG movement immeasurably damages our state’s oil and gas economy and the very companies that generate revenues for our [Permanent School Fund],” Kinsey said. “Texas and the PSF have worked hard to grow this fund to build Texas’s schools.”
South Carolina, Utah, Arkansas, Missouri, Louisiana, and other states have also divested or announced planned divestments of hundreds of millions of dollars from BlackRock and Fink.