BlackRock sued by Tennessee over claims it ‘misled consumers’ on ESG investments

BlackRock was hit with a lawsuit by Tennessee on Monday alleging that the world’s largest asset manager violated the state’s consumer protection law over its promotion of ESG investing.

Tennessee Attorney General Jonathan Skrmetti, a Republican, accused BlackRock of making conflicting statements on maximizing investment returns while giving “special consideration to environmental factors.”

“We allege that BlackRock‘s inconsistent statements about its investment strategies deprived consumers of the ability to make an informed choice,” Mr. Skrmetti said in a statement. “Ultimately, I want to make certain that corporations, no matter their size, treat Tennessee consumers fairly and honestly.”

It’s a first-of-its-kind civil suit against the company’s use of the investment strategy known as environmental, social and corporate governance — or ESG — that prioritizes climate change and social justice politics. Many conservatives deem the practice “woke capitalism.” 

BlackRock refuted Mr. Skrmetti‘s allegations and told The Washington Times it 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,” a BlackRock spokesperson said.

They said the company has invested roughly $40 billion in Tennessee on behalf of its clients.

BlackRock has repeatedly rejected assertions that it boycotts oil and natural gas companies over its support for ESG and corporate net-zero emissions goals, or that it puts political agendas before its fiduciary duty. 

The lawsuit intensifies the anti-ESG war from red states against BlackRock and other major investment firms and banks, including Vanguard, State Street, Wells Fargo and JPMorgan Chase.

Tennessee’s 64-page lawsuit, filed in Williamson County near Nashville, seeks a grand jury trial and that BlackRock pay legal fees and civil penalties and restitution to consumers of $1,000 per violation of the state’s consumer protection law.

The lawsuit alleges BlackRock‘s ESG investments violate their fiduciary duty to clients and constitute “deceptive acts and practices under the Tennessee Consumer Protection Act.”

“BlackRock marketed many of its funds as devoid of ESG considerations and has admitted that ESG aims — in particular, radically reducing portfolio companies’ carbon output — ‘do not provide an indication of current or future performance nor do they represent the potential risk and reward profile of a fund,’” Mr. Skrmetti‘s lawsuit stated. “Regardless, BlackRock committed to global organizations that it would pursue these aims across all assets under management. And it did. For years, however, BlackRock has misled consumers about the scope and effects of its widespread ESG activity.”

Tennessee is among the states where Republican state lawmakers have passed laws prohibiting ESG investments with state funds or engaging with pro-ESG asset managers and banks.

The ESG backlash has resulted in states divesting billions of dollars from BlackRock, whose assets under management stood at roughly $9.5 trillion as of earlier this year.