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BlackRock (BLK) Sued for Allegedly Misleading ESG Strategy
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BlackRock, Inc. (BLK - Free Report) has been sued by the U.S. state of Tennessee for allegedly breaching consumer protection laws by misusing environmental, social and governance (“ESG”) factors in its investment strategy.
A lawsuit was filed in state court yesterday by Tennessee attorney-general Jonathan Skrmetti, who claimed that the asset manager was inconsistent in stating whether it focused exclusively on investment returns or preferred ESG considerations.
Per the lawsuit, “For years . . . BlackRock has misled consumers about the scope and effects of its widespread ESG activity. BlackRock has downplayed the extent to which ESG considerations drive its investment strategies across all holdings, even in non-ESG funds and overstated the extent to which ESG considerations can affect companies’ financial performance and outlook.”
However, BLK has been rejecting Tennessee’s claims.
BlackRock said that it “fully and accurately” discloses its investment practices and approach to proxy voting. Hence, the firm plans to contest the accusations.
Earlier in 2023, as part of an investigation into potential violations of consumer law, Skrmetti ordered ten major asset managers to give information on how they would tackle climate change.
In March, Skrmetti and a few other state AGs wrote to money managers, suggesting they were breaching fiduciary duty in handling environmental or social issues.
Factors like climate change and workforce diversity have been increasingly considered by companies and investors because these can impact performance and reputation.
Over the past six months, shares of BLK have gained 15.3% compared with the industry’s growth of 18.3%.
Last month, Morgan Stanley (MS - Free Report) agreed on a $6.5 million settlement with six state AGs, led by New York AG Letitia James. The firm’s U.S. wealth management business, earlier known as Morgan Stanley Smith Barney LLC, was charged with failing to protect customers’ personal information while shutting down two data centers in 2016.
MS was accused of negligence in properly decommissioning computers that contained unencrypted customer data.
According to the agreement released by AG James, “Morgan Stanley failed to decommission its computers and erase unencrypted data in certain computer devices that were later auctioned while still containing consumers’ personal information, including data belonging to 1.1 million New Yorkers.”
A few months ago, Goldman Sachs (GS - Free Report) agreed to pay $6 million to the Securities and Exchange Commission (“SEC”) for not providing complete and accurate information in the blue sheets. It contained data regarding securities trading and transactions that were supplied to various regulatory authorities.
Per SEC’s findings, GS made more than 22,000 inadequate blue sheet submissions between 2012 and 2022, comprising 43 different types of errors that affected more than 163 million transactions.
SEC stated that GS did not have adequate processes to verify the accuracy of its electronic blue sheet submissions. Moreover, per the SEC, Goldman knowingly violated the recordkeeping and reporting provisions of the federal securities laws.
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BlackRock (BLK) Sued for Allegedly Misleading ESG Strategy
BlackRock, Inc. (BLK - Free Report) has been sued by the U.S. state of Tennessee for allegedly breaching consumer protection laws by misusing environmental, social and governance (“ESG”) factors in its investment strategy.
A lawsuit was filed in state court yesterday by Tennessee attorney-general Jonathan Skrmetti, who claimed that the asset manager was inconsistent in stating whether it focused exclusively on investment returns or preferred ESG considerations.
Per the lawsuit, “For years . . . BlackRock has misled consumers about the scope and effects of its widespread ESG activity. BlackRock has downplayed the extent to which ESG considerations drive its investment strategies across all holdings, even in non-ESG funds and overstated the extent to which ESG considerations can affect companies’ financial performance and outlook.”
However, BLK has been rejecting Tennessee’s claims.
BlackRock said that it “fully and accurately” discloses its investment practices and approach to proxy voting. Hence, the firm plans to contest the accusations.
Earlier in 2023, as part of an investigation into potential violations of consumer law, Skrmetti ordered ten major asset managers to give information on how they would tackle climate change.
In March, Skrmetti and a few other state AGs wrote to money managers, suggesting they were breaching fiduciary duty in handling environmental or social issues.
Factors like climate change and workforce diversity have been increasingly considered by companies and investors because these can impact performance and reputation.
Over the past six months, shares of BLK have gained 15.3% compared with the industry’s growth of 18.3%.
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Currently, BlackRock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Legal Issues of Other Finance Companies
Last month, Morgan Stanley (MS - Free Report) agreed on a $6.5 million settlement with six state AGs, led by New York AG Letitia James. The firm’s U.S. wealth management business, earlier known as Morgan Stanley Smith Barney LLC, was charged with failing to protect customers’ personal information while shutting down two data centers in 2016.
MS was accused of negligence in properly decommissioning computers that contained unencrypted customer data.
According to the agreement released by AG James, “Morgan Stanley failed to decommission its computers and erase unencrypted data in certain computer devices that were later auctioned while still containing consumers’ personal information, including data belonging to 1.1 million New Yorkers.”
A few months ago, Goldman Sachs (GS - Free Report) agreed to pay $6 million to the Securities and Exchange Commission (“SEC”) for not providing complete and accurate information in the blue sheets. It contained data regarding securities trading and transactions that were supplied to various regulatory authorities.
Per SEC’s findings, GS made more than 22,000 inadequate blue sheet submissions between 2012 and 2022, comprising 43 different types of errors that affected more than 163 million transactions.
SEC stated that GS did not have adequate processes to verify the accuracy of its electronic blue sheet submissions. Moreover, per the SEC, Goldman knowingly violated the recordkeeping and reporting provisions of the federal securities laws.