BlackRock is trying to grab large stakes in public utilities, even as it has pledged itself to radical ESG investing and carbon zero goals.

That’s a problem, as a large group of state Attorney Generals see it, and this past week they filed a motion with FERC to challenge BlackRock’s attempts to buy up those stakes.

It’s the latest effort in a year’s long effort by many states to try to hold the world’s largest investing company to account for what they argue are breaches of fiduciary responsibility with investor funds.

In short, BlackRock is supposed to be concerned with financial performance on behalf of their clients, and not using client funds to further ideological goals which comparatively diminish financial performance for their clients.

This is especially the case where clients are not being sufficiently informed regarding the nature and priorities of investment vehicles offered by BlackRock. 

Indiana Attorney General Todd Rokita commented regarding the legal action, as reported by Townhall.com:

“This is yet another example of radical leftists trying to circumvent the will of the American people in order to implement their draconian mandates. The restrictions these elitists are trying to impose on energy companies and utilities would never win approval at the ballot box,” he noted. “The public interest is served when investment companies build their business models on maximizing financial returns for clients,” Rokita reminded. “Conversely, the public interest is hijacked when these companies subjugate clients’ financial interests to leftist fever dreams.”

(“Woke BlackRock Might Be in Trouble Thanks to These State Attorneys General,” 11 May 2023.)

The group of state AGs signing onto the latest action includes Rokita,  Steve Marshall (AL), Treg Taylor (AK), Tim Griffin (AR), Brenna Bird (IA), Daniel Cameron (KY), Jeff Landry (LA), Lynn Fitch (MS), Andrew Bailey (Missouri), Austin Knudsen (MT), Mike Hilgers (NE), Dave Yost (OH), Alan Wilson (South Carolina), Marty Jackley (SD), Ken Paxton (TX), Sean Reyes (Utah) and Patrick Morrisey (WV). 

Part of a Longer Battle

The ongoing battle over BlackRock’s ESG driven investing began in August 2022, when a group of Republican state attorneys general sent a letter to BlackRock CEO Larry Fink expressing concerns about the asset manager’s environmental, social, and governance (ESG) investing protocols. The attorneys general alleged that BlackRock was using state pension fund assets to invest in companies that were not in the best financial interests of the pension funds, and that BlackRock was also using its position as the world’s largest asset manager to exert undue influence on companies to adopt ESG policies that were not in the best interests of shareholders.

BlackRock responded to the letter by stating that it was committed to acting in the best interests of its clients and that its ESG investing protocols were based on sound financial principles. The company also stated that it was open to working with the state attorneys general to address their concerns.

But their interpretation of “sound financial principles” is deceptive language that masks ESG investment factors that don’t prioritize financial returns for investors, including state pension funds, etc., according to state AGs. 

BlackRock has touted its ESG investment initiatives, and is a member of several climate groups devoted to radical climate agenda goals, including Climate Action 100+ and Net Zero Asset Managers Initiative (NZAM). 

The controversy over BlackRock’s ESG investing protocols highlights the growing debate over the role of ESG investing in the financial markets. 

Investing That Puts Ideological Goals Above Client Interests 

There are a number of specific laws that might be violated by ESG investing, with regard to the responsibilities of asset managers, including The Employee Retirement Income Security Act of 1974 (ERISA).

Such laws impose a number of requirements on asset managers, and many legal experts argue that ESG investing is likely violating these laws in a number of ways. For example, an asset manager that invests in a company according to ESG ratings could be violating its fiduciary duty to its clients. Additionally, an asset manager that fails to disclose material information about its ESG investing practices could be violating its disclosure requirements.

As Townhall reported, past legal action taken by state attorneys against Vanguard for ESG investing in 2022 resulted in that firm dropping its membership in NZAM.

“Large firms like BlackRock pretend to ‘passively’ manage their shares while using those assets to bully utility companies into adopting radical left-wing policies—policies which make our energy grid more expensive and more unreliable,” Executive Director of Consumers’ Research Will Hild reacted to the latest action against BlackRock.

“Affordable, reliable energy production is the cornerstone of our economy, and Americans’ quality of life depends on energy access,” he added. “FERC must protect these utilities from blatant and reckless interference by BlackRock and others like it.”

For related reading, see “DESANTIS SIGNS LEGISLATION REJECTING CBDC USE IN FLORIDA, CITING SURVEILLANCE AND ESG CONCERNS” in this issue.