by Alice Crowe
On January 17, 2025, BlackRock Inc. and Tennessee settled a lawsuit that the Tennessee Attorney General filed in December 2023.[1] This lawsuit represents just one of the money management company’s several fronts of defense against GOP-initiated allegations. [2]
In this suit, BlackRock was accused of making “misleading” statements regarding its Environmental, Social, and Governance (ESG) investment strategy and therefore breaching consumer protection laws; specifically, the complaint alleged that “BlackRock’s non-environmental, social and governance funds were being unfairly impacted by the money manager’s membership in climate groups, its shareholder-voting record and the pressure it puts on companies to move away from fossil fuels.”[3] After more than a year of litigation, Tennessee dismissed the case and there was no admission of wrongdoing or monetary fines on the part of BlackRock; however, to reach this resolution BlackRock agreed to shoulder more stringent obligations, such as new disclosure requirements, transparency in shareholder voting practices, and oversight through independent audits.[4]
On top of this lawsuit, BlackRock, alongside other money management groups, has faced suits in other Republican-led states, namely Texas, West Virginia, and Montana, for allegedly violating antitrust law by using their climate group membership to suppress coal production from investments increasing electricity prices.[5] While the officials leading the charge claim that the actions represent a push of political agenda, climate advocates increasingly argue that environmental risks are financial risks and analyzing them is therefore a fiduciary responsibility money managers owe shareholders.[6] Soon after the Tennessee suit surfaced, the House Judiciary Committee, also headed by Republican officials, released an interim report claiming that the financial industry colluded to “impose radical ESG-goals.”[7]
Looking forward, President Donald Trump may add support to these attacks on ESG and likely attempt to present BlackRock as an example of the consequences investment firms will face if they use environmental analyses in any part of their investment management.[8] Already, he has signed many executive orders drastically shifting the United States’ policy stances on environmental and social matters, including withdrawing from the Paris Agreement and rolling back diversity, equity, and inclusion initiatives.[9] The various legal actions began to unfold after Chief Executive Officer Larry Fink stated that BlackRock would address climate change through its investment strategies; he has since renounced this sentiment, explaining that the use of the ESG label has “become too politicized.”[10] Even though BlackRock and other investment firms have not yet lost a suit based on ESG-related allegations, the barrage of legal actions and resulting events, such as BlackRock’s recent withdrawal from Net Zero Asset Managers initiative and consent to tougher disclosure requirements, represent a major disincentive and roadblock to ESG efforts. [11] Additionally, the increasing frequency of antitrust arguments used against companies involved in ESG programs or sustainable investment groups creates dangerous risks that will likely chill companies engaging in these efforts.[12] Companies that wish to pursue environmentally friendly investment options and avoid legal action against them may find themselves with limited options. Recent events point to a new reality that companies engaging in ESG activities make themselves vulnerable to politicized actions through securities claims and antitrust claims.[13]
[1] Saijel Kishan, BlackRock Settles with Tennessee Over ESG Strategy, Bloomberg L. (Jan. 17, 2025, 1:54 PM), https://www.bloomberglaw.com/product/blaw/bloomberglawnews/antitrust/X8G8OBFG000000?bc=W1siU2VhcmNoICYgQnJvd3NlIiwiaHR0cHM6Ly93d3cuYmxvb21iZXJnbGF3LmNvbS9wcm9kdWN0L2JsYXcvc2VhcmNoL3Jlc3VsdHMvNzYyYzk2Y2M2YjQ0MTRiMGRkY2QxZWQwN2IwNTE3MTIiXV0–8c0addc6dcc4259d357ed59c75b4279a291d89bb.
[2] Id.
[3] Id.
[4] Id.; Attorney General Jonathan Skrmetti Announces Landmark Settlement with BlackRock, Inc. Regarding ESG Practices, Jonathan Skrmetti, Att’y Gen. & Rep. (Jan. 17, 2025, 10:50 AM), https://www.tn.gov/attorneygeneral/news/2025/1/17/pr25-3.html; Niket Nishant & Ross Kerber, BlackRock Agrees to New ESG Disclosures in Tennessee Settlement, U.S. News (Jan. 17, 2025), https://money.usnews.com/investing/news/articles/2025-01-17/tennessee-attorney-general-settles-esg-dispute-with-blackrock.
[5] Saijel Kishan, BlackRock, Vanguard Accused of Antitrust Violations by Texas, Bloomberg L. (Nov. 27, 2024, 3:15 PM), https://www.bloomberglaw.com/product/blaw/bloombergterminalnews/bloomberg-terminal-news/SNMKJ6DWX2PS.
[6] Id.; Steven Cohen, The Connection Between Environmental Risk, Financial Risk, and Data-Based Sustainability Management, Columbia SPS (Nov. 25, 2024), https://sps.columbia.edu/news/connection-between-environmental-risk-financial-risk-and-data-based-sustainability-management.
[7] Tim Quinson, House Committee Says It Finds Evidence of ‘Climate Cartel’, Bloomberg L. (Dec. 14, 2024, 5:46 AM), https://www.bloomberglaw.com/product/blaw/bloombergterminalnews/bloomberg-terminal-news/SOHBW7T0AFB4.
[8] See id.
[9] Samantha Barnes, Does ESG Stand a Chance in the Trump 2.0 Era?, Int’l Banker (Jan 23, 2025), https://internationalbanker.com/finance/does-esg-stand-a-chance-in-the-trump-2-0-era/.
[10] Kishan, supra note 1.
[11] Simon Jessop & Ross Kerber, Exclusive: Investor Climate Group Suspends Activities after BlackRock Exit, Reuters (Jan. 13, 2025, 6:13 PM), https://www.reuters.com/sustainability/sustainable-finance-reporting/investor-climate-group-suspends-activities-after-blackrock-exit-2025-01-13/.
[12] Drake Morgan & Marcus Navin-Jones, ESG Opponents’ Antitrust Accusations: Do They Make Sustainability Collaboration Dangerous?, Crowell (Sept. 24, 2024), https://www.crowell.com/en/insights/client-alerts/esg-opponents-antitrust-accusations-do-they-make-sustainability-collaboration-dangerous.
[13] See id.
