Investor reports and market analysis

Tennessee, BlackRock Settle ESG Lawsuit With $11.6 Trillion Asset Manager

Jan 17, 2025, 07:30 PM

Tennessee has reached a settlement with BlackRock Inc., resolving a lawsuit that accused the $11.6 trillion asset management giant of misleading consumers about the role of Environmental, Social, and Governance (ESG) factors in its investment strategies. Filed in December 2023 under the Tennessee Consumer Protection Act, the lawsuit alleged that BlackRock failed to adequately disclose the extent of ESG considerations in its decision-making and overstated the financial benefits of ESG-related strategies. Under the nine-page settlement, BlackRock has agreed to a range of measures, including increased transparency in proxy voting, third-party audits of compliance, removal of ESG ratings from certain funds, and improved investor communications. The agreement also requires BlackRock to disclose its membership in climate-focused organizations and ensures that non-financial goals are pursued only with explicit investor consent. Tennessee Attorney General Jonathan Skrmetti described the settlement as a precedent-setting move to protect investor interests, stating, "This is a hard pivot for BlackRock. It basically means ESG is dead at the biggest asset manager in the world." The settlement does not include penalties or admissions of wrongdoing by BlackRock but emphasizes reforms to align its practices with investor transparency and accountability.