A district court ruled that American Airlines did not prioritize the financial interests of its employees’ retirement funds and instead focused on environmental, social, and governance (ESG) goals.
U.S. District Court for the Northern District of Texas Judge Reed O’Connor wrote that the “facts compellingly demonstrated that Defendants breached their fiduciary duty by failing to loyally act solely in the retirement plan’s best financial interests by allowing their corporate interests, as well as BlackRock’s ESG interests, to influence management of the plan.”
“Plaintiff provided evidence demonstrating that Defendants acted disloyally because of BlackRock’s outsized influence. For example, as a large company who consumes copious amount of fossil fuels, American was potentially susceptible to a proxy fight of its own by failing to comply with BlackRock’s climate-related demands,” the decision added.
The airline company “proudly expressed a corporate commitment to ESG goals—specifically, climate change initiatives,” the ruling declared.
ESG investments usually underperform traditional investments by about 10%.
The decision is part of a 2023 lawsuit where American Airlines pilot Bryan Spence sued the company and alleged the airline violated its fiduciary duties by “investing millions of dollars of American Airlines employees’ retirement savings with investment managers and investment funds that pursue political agendas … activities which fail to satisfy these fiduciaries’ statutory duties to maximize financial benefits in the sole interest of the Plan participants.”
Last year, attorneys general from Alabama, Arkansas, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Nebraska, New Hampshire, North Dakota, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, and Wyoming warned asset managers that their push for ESG policies may violate their fiduciary duties.
The letter, led by Montana Attorney General Austin Knudsen (R), raised concerns that the 25 asset managers are “more concerned with earning social credit than doing what’s best for their clients,” Knudsen said in a statement at the time.
