The Secretary of State for Indiana, Diego Morales, has accused BlackRock of 54 securities violations “related to statements the firm has made regarding its ESG integration, which the order alleges contradict with disclosures BlackRock has made for non-ESG funds.” Lamar Johnson reports for Banking Dive:
BlackRock manages “some funds” for the Indiana Public Retirement System and “more than 415,000 Indiana residents,” according to Morales’ order. The cease-and-desist lists 54 counts of alleged Indiana securities violations related to statements the firm has made regarding its ESG integration, which the order alleges contradict with disclosures BlackRock has made for non-ESG funds.
Despite BlackRock’s disclosures on certain funds indicating the firm does not use ESG strategies, the asset manager has “issued several statements and actions in commitment of using all assets under its management to incorporate ESG considerations,” Morales’ office said Thursday. That includes advancing net-zero goals, the office said.
“My office is committed to rigorously enforcing the law and strengthening our regulatory frameworks to ensure Hoosier investors are protected and that those who exploit the system are held accountable,” Morales said in the release.
In an emailed statement Monday to ESG Dive, BlackRock said the order “completely mischaracterizes” the firm’s approach to investing, calling it “a politically motivated attack.”
“We are only focused on helping hundreds of thousands of Hoosier clients achieve their investment goals,” the company said. “We intend to defend ourselves and our clients against this arbitrary use of state power.”
The order notes BlackRock’s status as a member of the United Nations-backed NZAM, whose signatories commit to “[i]mplement a stewardship and engagement strategy, with a clear escalation and voting policy, that is consistent with our ambition for all assets under management to achieve net zero emissions by 2050 or sooner.”
The letter also notes the firm’s work with CA100+, which has seen several outflows of signatories throughout the year. BlackRock transferred membership to a smaller international arm of its business in February when JPMorgan and State Street left the climate coalition.
Action Line: Pressure from funds companies on public corporations to implement politicized ESG goals ignores the fiduciary duty those companies owe to shareholders. Instead of saving the world, investors have received underperformance and higher fees from their funds, along with a loss of control over their shares. When you want to talk about a portfolio in which you control the voting rights of your shares, I’m here. In the meantime, click here to subscribe to my free monthly Survive & Thrive letter.
