Mississippi Secretary of State Michael Watson sent a cease-and-desist letter to BlackRock earlier this week over the asset manager’s environmental, social, and governance (ESG) policies.
BlackRock “repeatedly made false and misleading statements to Mississippi investors,” according to a press release. “These misrepresentations pertain to BlackRock’s involvement in pushing ESG factors on portfolio companies.”
“Investment companies will not push their political agenda on Mississippians, especially through fraudulent and deceptive means,” Watson said. “All citizens should have the opportunity to make informed and educated decisions when investing their hard-earned money. If not, our office will hold these bad actors accountable.”
“BlackRock has made and continues to make untrue statements of material fact, and to omit material facts to make its statements not misleading, to investors and potential investors in Mississippi,” the letter reads. “These misrepresentations pertain to BlackRock’s provision of investment services, especially its involvement in pushing Environmental, Social, and Governance (‘ESG’) factors on portfolio companies. Additionally, 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.”
The asset manager’s false statements “fall into two main categories,” the letter notes. The first “relates to BlackRock’s funds that are marketed as nono-ESG funds.”
While BlackRock claims it doesn’t use all funds for ESG policies, it has previously “committed to use all assets under management to advance the environmental agenda of reducing carbon emissions to ‘net zero.’”
The second false claim “relates to BlackRock’s funds that are marketed as ESG funds.” BlackRock claims that ESG benefits clients’ financial outcomes, although “consideration of ESG factors does not provide an indication of better financial returns or current or future risk profiles.”
If the asset manager does not comply with the state’s demands, Mississippi may “impose a multimillion-dollar administrative penalty.”
BlackRock responded to the order in a statement: “Many policymakers and government officials have ideas on how we should invest our clients’ assets. We are always bound to invest consistent with our clients’ choices, their best financial interests, and applicable law. Our only agenda is maximizing risk-adjusted returns for the funds our clients choose to invest in. We operate in one of the most highly regulated industries in the country and are committed to following the law in every respect.”
Last year, Tennessee Attorney General Jonathan Skrmetti filed a lawsuit against BlackRock.
The lawsuit was a response to the company’s “conflicting statements and assertions regarding ESG’s influence over BlackRock’s business decisions,” according to a press release.
“As one of the world’s largest investment-management firms, defendant BlackRock, Inc. has been at the forefront of using aggressive strategies to push controversial Environmental, Social, and Governance (‘ESG’) goals across the assets it manages,” the lawsuit read. “BlackRock marketed many of its funds as devoid of ESG considerations and has admitted that ESG aims-in particular, radically reducing portfolio companies’ carbon output-‘do not provide an indication of current or future performance nor do they represent the potential risk and reward profile of a fund.’”
