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Tennessee has dropped its landmark lawsuit against BlackRock after the $11.6tn money manager promised to increase disclosure and compliance around its use of environmental, social and governance factors in investing.
The state’s Republican attorney-general Jonathan Skrmetti sued BlackRock in 2023, accusing the money manager of violating consumer protection laws and taking an inconsistent approach about whether it prioritised ESG considerations over investment returns.
Tennessee and BlackRock settled on Friday, with the latter promising to disclose the reasons for its votes on corporate proxies and avoid co-ordinating those decisions with other investors. BlackRock will also submit to compliance audits to insure that the votes cast by non-ESG funds are made for financial reasons.
BlackRock recently resigned from Net Zero Asset Managers, a group that co-ordinated industry concerns on climate change.
There was no fine or finding of consumer harm. Tennessee reserved the right to refile the lawsuit if BlackRock does not comply.
The lawsuit was part of a multifront blitz against the world’s largest asset manager and sustainable investing more broadly. Several states have added BlackRock and other financial firms to boycott lists for alleged hostility to fossil fuel, and federal regulators have questioned whether the group is a truly passive investor.
BlackRock said: “We’re pleased to resolve this matter. BlackRock has consistently acted in the best interests of our clients, and we welcome the opportunity to demonstrate that fact through even greater transparency about our practices.”
“This resolution assures that the money Tennesseans invest with BlackRock is managed consistent with the funds’ disclosures,” said 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 towards these non-financial goals.”
A multistate antitrust lawsuit alleging that BlackRock, State Street and Vanguard conspired to curtail coal supplies to further “a destructive, politicised environmental agenda” is still pending.
