Breaking new legal ground in the escalating war between red-state officials and Wall Street investment firms, Tennessee Attorney General Jonathan Skrmetti sued BlackRock on Dec. 18 for making conflicting statements on investment returns and giving “special consideration to environmental concerns.”

“We allege that BlackRock’s inconsistent statements about its investment strategies deprived customers of the ability to make an informed choice,” Skrmetti said. “Ultimately, I want to make certain that corporations, no matter their size, treat Tennessee consumers fairly and honestly.”

The lawsuit alleges that BlackRock’s ESG (environmental, social and governance) investment strategies violate the state’s consumer protection laws. Skrmetti is seeking restitution to consumers of $1,000 per violation of the state’s consumer protection laws, along with the demand that BlackRock be liable for all legal fees and civil penalties.

Alleging that BlackRock’s ESG investing violates the company’s fiduciary duty to clients, the complaint says such practices constitute “deceptive acts and practices under the Tennessee Consumer Protection Act.”

“BlackRock marketed many of its funds as devoid of ESG considerations and has admitted that ESG aims — in particular, radically reducing portfolio companies’ carbon output — do not provide an indication of current or future performance nor do they represent the potential risk and reward profile of a fund,” Skrmetti’s lawsuit states.

“Regardless, BlackRock committed to global organizations that it would pursue these aims across all assets under management. And it did. For years, however, BlackRock has misled consumers about the scope and effects of its widespread ESG activity.”

BlackRock refuted Skrmetti’s allegations, telling The Washington Times it will “vigorously contest any accusations that BlackRock violated Tennessee’s consumer protection laws.”

“Contrary to the attorney general’s claims, BlackRock fully and accurately discloses our investment practices and our approach to proxy voting,” the company said.

The stage is now set for a first-of-its-kind courtroom battle between the Wall Street behemoth and the Tennessee attorney general. Meanwhile, nine states have chosen to divest from BlackRock. They are Florida ($2 billion), Louisiana ($794 million), Arizona ($543 million), Texas ($521 million), Missouri ($500 million), South Carolina ($200 million), Arkansas ($125 million), Utah ($100 million), and West Virginia ($21.8 million) for a total of $4.8 billion. As impressive as these divestments are, they pale compared with BlackRock’s total assets of $1.5 trillion. It is the world’s largest asset-management company.

Because ESG investing — in the name of combatting climate change — shuns fossil-fuel companies, it is no surprise that Texas and Louisiana, significant oil and natural gas producers, have pulled their investments from BlackRock. But Florida, Arkansas, Missouri and Arizona have little, if any, fossil fuel industries. But they, too, have taken their money elsewhere, primarily to protect their pension funds from ESG’s poor returns, which are well below non-ESG funds.

Other companies prominent in ESG investing include Vanguard, JP Morgan Chase, State Street and Wells Fargo.

The poor performance of ESG investments and the public relations problems associated with several states taking their business elsewhere did prompt BlackRock CEO Larry Fink to distance himself from the term ESG. But in practice, nothing has changed.

Bonner Russell Cohen is a senior policy analyst with CFACT. He wrote this for InsideSources.com.

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