The fight over woke ESG — environmental, social and governance — policies being used by massive asset managers to make investment decisions entered new territory on Wednesday, thanks to Mississippi Secretary of State Michael Watson.
In a first-of-its-kind move, Watson and his office's Securities Division issued a cease and desist order and notice of intent to impose an administrative penalty "to stop BlackRock from inflicting immediate and irreparable public harm" on Mississippi's residents.
It alleges that BlackRock, the world's largest asset manager noted for its commitments to advance ESG standards, has been and is making "untrue statements of material fact" as well as "omit[ting] material facts to make its statements not misleading" to Mississippians about its "investment services, especially its involvement in pushing [ESG] factors on portfolio companies." The cease and desist also states that "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."
These "untrue and misleading" claims, the cease and desist says, fall into two main categories. The first is BlackRock's marketing of "non-ESG funds" which Watson says is "misleading to investors who are not interested in ESG and are led to believe that BlackRock's non-ESG funds will be managed for the sole purpose of investors' financial return without regard to ESG criteria." However, Watson says, that's not true "because BlackRock has committed to use all assets under management to advance the environmental agenda of reducing carbon emissions to 'net zero.'"
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BlackRock is a signatory to the "Net Zero Asset Managers Commitment" (NZAM) which means it "commits to support the goal of net zero greenhouse gas (‘GHG’) emissions by 2050, in line with global efforts to limit warming to 1.5°C (‘net zero emissions by 2050 or sooner’)" and "commits to support investing aligned with net zero emissions by 2050 or sooner."
The second category of "untrue and misleading" claims outlined by Watson deals with BlackRock's ESG funds and claims that such investments provide long-term financial benefits for companies and clients. "These statements are untrue, or omit to state material facts to make them not misleading," Watson says in the cease and desist, "because the consideration of ESG factors does not provide an indication of better financial returns or current or future risk profiles."
Watson's cease and desist adds that claims of financial benefit from ESG funds "are misleading to investors who are interested in ESG investing for financial (as opposed to social or political) reasons, and who are led to believe that BlackRock's ESG funds will receive a financial benefit from BlackRock's consideration of ESG criteria." Watson also notes that "BlackRock charges higher fees for some of its ESG funds than it does for comparable non-ESG funds."
"Investment companies will not push their political agenda on Mississippians, especially through fraudulent and deceptive means," Watson said in a statement provided to Townhall on Wednesday. "All citizens should have the opportunity to make informed and educated decisions when investing their hard-earned money," he emphasized. "If not, our office will hold these bad actors accountable."
Will Hild, the executive director of watchdog Consumers' Research, heralded Watson's "first-of-its-kind action" as "another huge blow to Larry Fink and his continued support of the leftist ESG agenda."
"Larry Fink and BlackRock continue to pretend that the only time they engage in ESG, it is with permission of the shareholders, but in reality, ESG policies have seeped into every facet of BlackRock's asset management," Hild explained. "They've been lying to their customers, and states like Mississippi are not going to allow this to continue. Consumers’ Research will continue to support bold actions taken by state leaders to put an end to the misuse of assets by dishonest Wall Street fat cats like Larry Fink and BlackRock," Hild pledged.
On the other side of the debate over ESG, BlackRock said in a statement to Townhall that "[m]any policymakers and government official have ideas on how we should invest our clients' assets" but insisted it is "always bound to invest consistent with our clients' choices, their best financial interests, and applicable law."
According to BlackRock, its "only agenda is maximizing risk-adjusted returns for the funds our clients choose to invest in" and it operates "in one of the most highly regulated industries in the country" and remains "committed to following the law in every respect."
BlackRock also pointed Townhall to its "2030 Net Zero Statement" that states "BlackRock’s role in the transition is as a fiduciary to our clients" and "is to help them navigate investment risks and opportunities, not to engineer a specific decarbonization outcome in the real economy."
But BlackRock's net zero statement is contradicted by the NZAM commitment it signed that commits BlackRock to working (emphasis added) "in partnership with asset owner clients on decarbonisation goals, consistent with an ambition to reach net zero emissions by 2050 or sooner across all assets under management."
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