BlackRock Agrees to Disclose Use of Sustainable-Investment Factors in Settlement with Tennessee
New York-based asset manager BlackRock has agreed to new disclosure requirements about its use of sustainable-investment factors as part of a legal settlement with Tennessee Attorney General Jonathan Skrmetti. The agreement comes as the company and other firms have been facing increasing pressure from Republican politicians, including incoming U.S. President-elect Donald Trump, to move away from environmental, social, or governance (ESG) measures.
Skrmetti sued BlackRock late in 2023, alleging that the company did not adequately disclose its use of ESG factors and overestimated their financial benefits. Although BlackRock did not admit to wrongdoing or pay fines as part of the deal, Skrmetti hailed the agreement as a significant step towards the end of the ESG moment.
Under the agreement, BlackRock will provide quarterly, not annual, details about its votes and will give a rationale when its non-ESG funds cast proxy votes against management recommendations on environmental or social matters. The company will also provide a detailed report on its use of sustainable-investment factors, including the specific factors it uses and how it deploys them.
The agreement is seen as a win for Skrmetti, who has been a vocal critic of ESG investing. “BlackRock was at the heart of this, the biggest asset manager in the world, and their willingness to undertake this settlement speaks to the end of the ESG moment,” he said.
BlackRock, which manages around $11.6 trillion in assets, stated that it was pleased to resolve the dispute and was committed to demonstrating its commitment to transparency through the new disclosure requirements. The company has faced growing pressure from Republican politicians, including Skrmetti and Trump, to divest from ESG measures and focus on traditional financial metrics.
The legal settlement is seen as a major victory for anti-ESG forces, which have gained momentum in recent years. The term ESG investing was popularized in the early 2010s, but it has faced criticism from some quarters, who argue that it is based on flawed assumptions and lacks transparency. The agreement is expected to have far-reaching implications for the asset management industry, as other firms may be forced to follow suit and reconsider their ESG strategies.
