Mississippi intends to impose a multimillion-dollar fine on BlackRock for ESG investments
Mississippi Secretary of State Michael Watson declared on Wednesday the initiation of a cease-and-desist order against BlackRock, aimed at halting alleged fraudulent activities by the investment behemoth and seeking to impose a multimillion-dollar administrative penalty due to the company’s Environmental, Social, and Governance (ESG) investment policies.
The order, lodged by the Securities Division of the Secretary of State’s Office, alleges that BlackRock disseminates false and misleading statements, particularly regarding its promotion of ESG factors in portfolio companies. The secretary’s office asserted that BlackRock has positioned itself as a frontrunner in the investment industry regarding these ESG practices.
The order delineates two main categories of purportedly misleading statements by BlackRock. Firstly, concerning funds marketed as non-ESG, investors are purportedly led to believe that these funds are managed without considering ESG criteria, which the order disputes. It references BlackRock’s involvement in initiatives such as the Net Zero Asset Managers (NZAM) and Climate Action 100+ (CA100+), which require participants to utilise all managed assets to achieve climate-related objectives and engage with portfolio companies.
Regarding ESG funds, the order alleges that BlackRock makes deceptive claims regarding the benefits of ESG for companies’ long-term financial prospects and client financial outcomes. The filing disputes these assertions, stating that consideration of ESG factors does not necessarily correlate with better financial returns or risk profiles.
As the largest global investment management company, BlackRock has become a focal point of criticism from Republican politicians in the U.S., who accuse the firm of advancing a social agenda or of adversely impacting energy companies. This move echoes a similar lawsuit filed in December by Tennessee’s Attorney General and the recent decision by Texas’ State Board of Education to divest funds from BlackRock, both citing concerns over the firm’s involvement in ESG initiatives.
