BlackRock Faces Legal Heat in Mississippi Over Alleged Misleading ESG Statements

Listen to this story:

BlackRock, the world’s largest asset manager, is under fire again for its environmental, social and governance (ESG) investment strategies. This time, Mississippi Secretary of State Michael Watson issued a “cease and desist” order, accusing the firm of making “false and misleading statements” to investors in the state.

The 33-page document alleges that BlackRock deceives investors about its commitment to climate-conscious investing, particularly in its exchange-traded funds (ETFs). Watson argues that while BlackRock claims these products aren’t managed with an ESG lens, the firm actively pushes companies to decarbonize through shareholder engagement and lobbying efforts. He points to BlackRock’s participation in initiatives like the Net Zero Asset Managers (NZAM) as evidence of this disconnect.

Many of BlackRock’s acts, practices and courses of business operate or would operate as a fraud or deceit upon investors and potential investors in Mississippi,” Watson said in the order.

This legal action follows a similar lawsuit filed by Tennessee in December 2023, which accused BlackRock of misleading investors about the financial benefits of ESG investing. Both cases highlight the ongoing political controversy surrounding ESG. BlackRock maintains that its focus is on “maximizing risk-adjusted returns for the funds our clients choose to invest in,” and integrating ESG factors is simply part of its investment analysis.

BlackRock faces potential financial penalties and, more importantly, a ban on doing business in Mississippi if found to be in violation. The firm has 30 days to respond to the allegations.

We operate in one of the most highly regulated industries in the country and are committed to following the law in every respect,” BlackRock said in a statement to Reuters. “Our only agenda is maximizing risk-adjusted returns for the funds our clients choose to invest in,” it added.

This isn’t the first time BlackRock has been targeted by Republican-led states over its ESG policies. Texas recently withdrew $8.5 billion from the company, citing concerns about the impact on returns. CEO Larry Fink has acknowledged the political pressure and distanced himself from the “ESG” label, emphasizing instead the importance of transitioning to clean energy.

With over $10 trillion in assets under management, BlackRock remains a dominant force in the financial world. However, the continued legal and political challenges raise questions about the future of ESG investing and how BlackRock will navigate this increasingly complex landscape.