BlackRock has reached an agreement to implement new ESG disclosure requirements as part of a settlement in Tennessee.
Asset management firm BlackRock has consented to new disclosure obligations regarding its application of sustainable investment criteria as part of a legal settlement with Tennessee Attorney General Jonathan Skrmetti, as announced by his office on Friday.
This resolution represents a significant development for BlackRock, headquartered in New York, and other firms as they shift away from environmental, social, and governance (ESG) considerations. A growing anti-ESG sentiment has emerged among Skrmetti and various Republican leaders, including the incoming U.S. President-elect Donald Trump.
Skrmetti initiated legal action against BlackRock in late 2023, claiming that the firm failed to sufficiently disclose its use of ESG factors and exaggerated their financial advantages.
While BlackRock did not acknowledge any wrongdoing or incur fines as part of the settlement, Skrmetti remarked in an interview with Reuters that the agreement is a notable reflection of current trends. "BlackRock was at the heart of this, the biggest asset manager in the world, and their willingness to undertake this settlement speaks to the end of the ESG moment," he stated. He also noted that the company's decision to withdraw from an investor climate group on January 9 "certainly contributed to" the finalization of the agreement.
With approximately $11.6 trillion in assets under management, BlackRock expressed satisfaction in resolving the matter with Tennessee. "BlackRock has always acted in the best interests of our clients, and we appreciate the chance to further demonstrate this through enhanced transparency regarding our practices," the company stated through a representative. Among the stipulations, BlackRock has agreed to provide quarterly disclosures instead of annual ones concerning the votes it casts, along with a justification when its non-ESG funds vote against management recommendations on environmental or social issues.
BlackRock already shares many of these details on its website. Skrmetti indicated that the formalization of these disclosures establishes a "comprehensive compliance regime," and the absence of financial penalties facilitated the swift resolution of the agreement. ESG investing had previously experienced a surge in popularity within the financial sector, but investors are now reassessing their approaches. Republicans, particularly those representing energy-producing states, have intensified their scrutiny of BlackRock and its competitors, such as Vanguard and State Street, regarding this matter. In 2023, Fink stated that he had ceased using the term ESG due to its increasing politicization.
