(Bloomberg) — Tennessee said it settled a lawsuit with BlackRock Inc. after accusing the world’s largest money manager of allegedly breaching consumer protection laws by making “misleading” statements about its ESG investment strategy.
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“This resolution assures that the money Tennesseans invest with BlackRock is managed consistent with the funds’ disclosures,” Tennessee Attorney General Jonathan Skrmetti said in a statement on Friday.
The attorney general’s lawsuit, filed in December 2023, alleged that BlackRock’s non-environmental, social and governance funds were being unfairly impacted by the money manager’s membership in climate groups, its shareholder-voting record and the pressure it puts on companies to move away from fossil fuels.
As part of its settlement, BlackRock agreed to boost transparency of its shareholder voting practices and enact compliance measures, including independent audits. And for funds that don’t have specific objectives beyond financial performance, BlackRock commits to back shareholder proposals solely to further the financial interests of investors, Skrmetti’s filing said.
A BlackRock spokesman said in an emailed statement that the firm was pleased to resolve the case. The company said in the statement that it has consistently acted in the best interest of clients, and “we welcome the opportunity to demonstrate that fact through even greater transparency about our practices.”
BlackRock, which manages $11.6 trillion, has been the target of a barrage of legal actions from Republican politicians after it championed addressing climate change. In response, Chief Executive Officer Larry Fink has said he no longer uses the ESG label because it’s become too politicized. The Tennessee lawsuit was the first by a GOP official against an investment firm for its ESG strategy.
In November, BlackRock, along with Vanguard Group Inc. and State Street Corp., was sued by Texas and other Republican-led states for allegedly breaching antitrust laws by using climate-friendly investment strategies to suppress coal production. BlackRock said the suggestion that it invested in companies with the goal of harming them “is baseless and defies common sense.”
The three largest money managers also were the focus of a report last month from the GOP-led House Judiciary Committee that said it found “evidence of collusion and anticompetitive behavior” by the financial industry to “impose radical ESG-goals” on US companies.
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In recent weeks, Wall Street banks and investment firms have exited climate-finance groups amid the attacks from GOP lawmakers.
The Tennessee settlement follows the decision last year by a New York judge to dismiss a lawsuit from a conservative group filed against New York City pension funds over their decision to sell billions of dollars of fossil-fuel holdings.
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