Tennessee Attorney General Jonathan Skrmetti has announced a settlement with BlackRock, Inc., addressing allegations that the investment firm misled consumers about its use of Environmental, Social, and Governance (ESG) factors in investment decisions. The lawsuit was filed under the Tennessee Consumer Protection Act.
The state alleged that BlackRock did not sufficiently disclose its ESG considerations in asset management and overstated the financial benefits of ESG strategies. These actions were said to have misled investors about BlackRock's investment goals and alignment with climate-focused initiatives.
"This resolution assures that the money Tennesseans invest with BlackRock is managed consistent with the funds’ disclosures," stated Attorney General Skrmetti. "While investors are always free to buy cause-oriented products instead of focusing on maximum return, this settlement ensures that only investors who make a knowing choice will see their assets directed toward these non-financial goals."
Key terms of the settlement include enhanced transparency, compliance measures, investor communications, and a commitment to financial interests. BlackRock will improve disclosure of proxy voting practices and implement third-party audits to ensure adherence to the agreement. The firm also commits to aligning communications with established laws on disclosure and fiduciary duty. For funds focused solely on financial performance, shareholder votes will be cast to further investors' financial interests.
The State of Tennessee will dismiss the lawsuit without prejudice but reserves the right to refile if there is substantial non-compliance by BlackRock.