Tennessee Attorney General Jonathan Skrmetti announced a “landmark” settlement with BlackRock over allegations that the asset management giant had misled consumers over the role of environmental, social and governance factors in its investment practices.
The settlement ends a lawsuit that was originally filed in December 2023 by the state of Tennessee under the Tennessee Consumer Protection Act. The suit alleged that BlackRock overstated the financial benefits of ESG-related strategies and didn’t adequately disclose its integration of ESG factors.
Skrmetti had argued that BlackRock’s membership in Climate Action 100+ and the Net Zero Asset Managers initiative meant that the firm promised to pursue ESG investing goals across all of its assets not just dedicated funds.
“This resolution assures that the money Tennesseans invest with BlackRock is managed consistent with the funds’ disclosures,” Skrmetti said in a Jan. 17 statement. “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.”
Skrmetti said in his statement that terms of the settlement include BlackRock increasing its disclosure of its proxy voting practices as well as audits by third parties to monitor adherence to the agreement terms.
“We’re pleased to resolve this matter,” said a spokesperson for BlackRock in a statement. “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.”
Tennessee said it would dismiss the lawsuit as part of the settlement, but reserves the right to refile if BlackRock does not "substantially comply."
Earlier this month, BlackRock left the Net Zero Asset Managers initiative amid a Wall Street exodus. The $11.6 trillion manager said at the time that membership had “caused confusion regarding BlackRock’s practices and subjected us to legal inquiries from various public officials.”
In November, BlackRock, along with Vanguard Group and State Street was also sued by Texas and other Republican-led states for allegedly breaching antitrust laws by using climate-friendly investment strategies to suppress coal production.