BlackRock, the world’s largest private equity firm, has received a Cease and Desist Order from Mississippi Secretary of State Michael Watson and his office’s Securities Division alleging deceptive practices in its Environmental, Social, and corporate Governance (ESG) programs.
The letter claims that BlackRock has repeatedly made “untrue statements of material fact” to investors, especially in omitting the extent to which ESG philosophy influences its investment portfolios. It argues that BlackRock’s self-billed “non-ESG funds” are misleading, as the company admits to having “committed to use all assets under management to advance the environmental agenda of reducing carbon emissions to ‘net zero.’” Therefore, these funds are manifestly not “managed for the sole purpose of investors’ financial return without regard to ESG criteria.”
Secondly, the Secretary of State takes issue with the firm for claiming that ESG is beneficial to the long-term financial bottom line of its clients.
Mississippi Sec. of State @MichaelWatsonMS set the record straight on @BlackRock talking out of both sides of their mouth, as they continue to prioritize ESG over their fiduciary duty:
"If you're not telling the truth about your investments, you're committing securities fraud." https://t.co/xnUxgO9aOK pic.twitter.com/vwKFC5GyIv
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“These statements are untrue, or omit to state material facts to make them not misleading, because the consideration of ESG factors does not provide an indication of better financial returns or current or future risk profiles,” the text continues. It reasons that this claim amounts to deceiving the customer, citing several studies about the low performance of ESG funds, and adds that BlackRock sometimes charges higher fees for said funds.
“As detailed extensively in this order, BlackRock stated on multiple occasions either expressly through publications or by action that the company does in fact incorporate ESG considerations into its non-ESG funds,” the order claims.
The Secretary of State imposed an “administrative penalty” to prevent BlackRock “from inflicting immediate and irreparable public harm,” as the alleged actions violate Mississippi’s Securities Act.
In September 2023, BlackRock began backing away from the ESG movement, closing ESG funds with tens of millions of dollars in assets. Fink had said in June 2023 that his firm was worried about the backlash it was getting due to the “weaponiz[ation]” of the ESG term.
Read the full order below:
Shane Devine is a writer covering politics, business, and culture for Valuetainment. Follow Shane’s work here.
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